Powell stops the sorrow of hysteria: how Bitcoin reclaims $40,000
In the early New York session on Thursday, the flagship cryptocurrency surged to an intraday high of $40,127, a gain of more than 7%.
Its upward movement came after a major negative reversal earlier this week, when the price dropped from almost $42,000 to as low as $31,100. (data from Coinbase). On a resurgent US dollar and yields attitude, many expected Bitcoin to continue to fall.
Nonetheless, investors’ attention switched to US President-elect Joe Biden’s stimulus speech and Federal Reserve Chairman Jerome Powell’s webcast at Princeton University, and the cryptocurrency avoided downward expectations.
Mr. Biden is expected to present ideas for a relief package this week, following statistics showing an increase in overall jobless claims last week, the highest level since August. The top Democrat wants to spend “trillions of dollars” on checks to individual Americans, jobless payments, and investments in renewable energy solutions.
Prior to Mr. Biden’s speech, the US dollar index fell 0.12%. As a consequence, Bitcoin, which usually trades in the opposite direction to the dollar, rebounded. This is due to a narrative that portrays cryptocurrencies as a hedge against an oversupplied US dollar with no supply ceiling.
No more hysteria sorrow
Mr. Powell gave Bitcoin even more strength by putting a halt to any conjecture about the reported “taper tantrum” intentions. The Fed chairman stated that he intends to maintain easy-money policies for the foreseeable future, citing sluggish employment growth in the United States.
The comments came amid rising anticipation that the Fed will raise short-term interest rates and reduce its bond-buying program if the US economy recovered quicker than projected. Powell, on the other hand, believes the Fed will not cease easing until inflation is above 2% and full employment is achieved.
Short-term US Treasury rates decreased as a result of the news, prompting investors to seek higher returns in riskier markets like Bitcoin.