Bitcoin Dips As Powell Voices Plans To Accelerate Bond Taper
Jerome Powell – Chairman of the Federal Reserve – has now confessed that rising US inflation numbers are not “transitory”. As such, he is considering speeding up the taper on the Fed’s bond purchase program to bring inflation under control.
As the news dropped, Bitcoin’s price almost immediately fell by $2000.
Inflation Not “Transitory,” Says Powell
The chairman voiced his new plans while testifying in front of the Senate earlier today. He said that the US economy is currently strong enough – and inflation hot enough – to warrant a faster taper.
“It is appropriate, I think, for us to discuss at our next meeting, which is in a couple of weeks, whether it will be appropriate to wrap up our purchases a few months earlier,” said Powell.
At the beginning of this month, the Federal Reserve announced its plans to gradually reduce bond purchases over the coming months, to address inflation fears. This too led to a Bitcoin price dip.
For months, both Powell and Treasury Secretary Janet Yellen have maintained that rising inflation numbers are a “transitory” (temporary) phenomenon. Most rising costs have been attributed to labor shortages and supply chain issues.
However, after questioning from pro-Bitcoin senator Pat Toomey, Powell admitted that “transitory” isn’t the right word. Considering that inflation has run well above the Fed’s 2% target for years now, he said they ought to “retire” the term, and “better clarify” what they mean.
Worse yet for Powell, the new “omicron” coronavirus variant may create further economic pressures that limit his ability to safely reduce inflation.
Bitcoin Falls On Tapering News
Nevertheless, Powell’s hawkish words seemingly sent a shock through the crypto market. As popular Bitcoin analyst Plan B pointed out, Bitcoin dropped from $59k to $57k right after Powell’s comment.
Bitcoin has gained a reputation as “digital gold,” and is becoming widely recognized as an inflation hedge. However, many believe that Bitcoin will lose its value proposition if inflation is reduced. Mike Novogratz – billionaire CEO of Galaxy Investment Partners – would agree, saying Jerome Powell’s renomination as chairman is bearish for crypto and other inflation-hedge assets.Link to source