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Bitcoin and altcoins plunge again, as Jerome Powell hints at some bold measures ahead this year as part of the Fed’s quantitative tightening measures.
After some healthy bounceback earlier on Wednesday, January 26, the crypto market plunged once again after the FOME meeting announcement. Fed Chairman Jerome Powell hinted at some tough measures ahead this year in order to control inflation. After moving past $38,700 levels on Wednesday, Bitcoin has once again corrected 4.5% today slipping under $36,000. As of press time, being under the influence of the FOMC meeting news, Bitcoin is trading 4% down at a price of $35,944 and a market cap of $689 billion.
In response to the evolving market conditions, Powell spoke about the need to change the Fed policy. Powell said that the first interest rate hike shall happen sometime around March 2022. Besides, the Fed chairman also concluded the Fed emergency bond-buying program.
Powell also talked about how they are planning to shrink the Fed balance sheet which has grown double in size since the beginning of the pandemic. Well, the message is clear that the Fed is likely to initiate some bold measures of quantitative tightening this year. Aneta Markowska, chief economist at Jeffries said:
“For now, we maintain our base case for 4 hikes this year, but we now view it as a floor rather than a cap. The Fed did nothing to contain market expectations to 4 hikes, effectively inviting the market to price in even more.”
Bitcoin and Crypto Market Comes under Pressure before the FOMC Meeting
Following the Fed commentary, the US stock market turned red. The Dow Jones Industrial Average (INDEXDJX: .DJI) corrected 300 points. Similarly, the S&P 500 corrected 30 points while the Nasdaq Composite corrected 68 points.
As we reported, the tech stocks have taken a beating while the banking and energy stocks have been showing healthy recovery. As the market sentiment turned negative on Wednesday, the ripple effect was seen in the crypto space as well.
The crypto space lost all of its Tuesday’s gains. Bitcoin and the altcoin space came soon under severe pressure. Despite this recent market volatility, some market analysts continue to stay bullish about Bitcoin for this year of 2022. Mike McGlone, senior commodity strategist at Bloomberg Intelligence said that Bitcoin is trading at a 30% discount to its 20-week average. The analyst suggested that these might be signs of forming a new bottom.
The fact that #Bitcoin is an up-and-coming asset, with less than $1 trillion market cap vs. about $100 trillion of global equities, that got a bit extended may give the crypto an advantage. Our graphic depicts a bottoming indicator for Bitcoin — about 30% below its 20-week avg. pic.twitter.com/5OzZ2F3gSp
— Mike McGlone (@mikemcglone11) January 25, 2022
Many had predicted that Bitcoin will likely hit $100K levels this year. However, the way that Bitcoin has been following the US equity market, we can only expect more volatility. Apart from Bitcoin, altcoins have also been under deep waters.