The world’s major cryptocurrency took another hit on Friday, after a statement by Federal Reserve Chair Jerome Powell.
The chairman announced at the annual economic conference in Jackson Hole that the United States Central Bank will likely maintain its policy of increasing interest rates in the near future.
“While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses.” Powell stated at the latest Fed’s annual economid conference. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”
After Jerome Powell’s statement, the price of Bitcoin dropped this morning, dropping close to $20,000, a low mark the currency had not reached since December of 2020.
After Federal Reserve Chair Jerome Powell warned the U.S. central bank may continue hiking interest rates, the price of Bitcoin dropped this morning, dropping close to $20,000.
The largest cryptocurrency by market cap suffered a near 4% drop only hours after the Fed statements.
Following a significant abandonment of crypto investors post-pandemic, Bitcoin has had a rough 2022.
Currently, the asset is 70% below its all-time high, which occurred in November 2021 and was nearly $70k.
Nearly all major cryptocurrencies like Ethereum, BNB, and Dogecoin also followed Bitcoin’s downtrend following the unfortunate news for the crypto world.
On Friday, August 26th, the cryptocurrency market cap in total was $1.05 trillion, a net loss of 3.8% from the previous day.
Why Does The Federal Reserve Have so Much Influence Over Crypto?
The US government branch responsible for conducting the nation’s monetary policy is pointed at as one of the biggest proponents of the current “crypto winter”. In fact, since the beginning of the year, the Fed has severely influenced the cryptocurrency market.
As the American government attempts to control inflation by hiking up interest rates, “riskier” assets like cryptocurrency tend to drop as the American Government increases interest rates.
Crypto is not the only asset to suffer from this, nearly all currencies and stocks tend to mirror the Federal Reserve’s policies.
In fact, the DowJones has also seen a near 3% decrease in the last 5 days.
Due to the US Government’s efforts to contain inflation in the wake of the epidemic, recent Fed rate increases have been the most prominent in decades.
Investors gathered in July to discuss whether the Fed’s decision has already or would lead to a recession, which might have severe repercussions on all international markets, including the cryptocurrency market.