Bitcoin and the cryptocurrency market may face challenges after a high-ranking Federal Reserve official expressed concerns regarding the economy and the risks associated with prematurely lowering interest rates.
Summary
- Bitcoin and the crypto market are under threat as a Fed official raises alarms about inflation and interest rates.
- Beth Hammack asserts that the Fed should avoid cutting interest rates while inflation remains high.
- Jerome Powell is slated to speak on Friday at the Jackson Hole Symposium in Wyoming.
Bitcoin (BTC) fell to $112,000, significantly below its peak of $124,200. The global cryptocurrency market cap decreased by 1.45% to $3.8 trillion, with altcoins like Mantle, Virtuals Protocol, Official Trump, and Ethena being among the biggest losers.
Beth Hammack’s Concern on Interest Rates
A key factor in Thursday’s market decline was Beth Hammack’s remarks, a senior Fed official, who warned that interest rates should remain elevated due to persistent inflation. She stated:
“We have inflation that’s too high and has been trending upwards over the past year. Based on the information I have, if the meeting were to occur tomorrow, I would not support reducing interest rates.”
Hammack’s comments were made at the Jackson Hole Symposium in Wyoming, where Fed Chair Jerome Powell, is expected to deliver a significant speech on Friday. He will likely respond to the recent employment and inflation figures.
The jobs report indicated that the unemployment rate increased to 4.2% in July, while core consumer inflation rose to 3.1% during the same period. A report from Michigan University disclosed that inflation expectations were increasing.
If Powell echoes Hammack’s viewpoint, he may indicate that inflation remains too high, delaying potential rate cuts. Historically, Bitcoin and other cryptocurrencies have fared better when the Fed adopts a more accommodating stance.
Bitcoin Price Rising Wedge Suggests Potential Crash
Another significant concern for the crypto market is that Bitcoin has established a notably bearish rising wedge chart pattern on the weekly graph.
This pattern, highlighted in green, consists of two upward-sloping and converging trendlines. A bearish breakdown typically occurs when these lines are about to meet.
Additionally, Bitcoin has produced a shooting star candlestick pattern characterized by a small red body and a lengthy upper shadow. Similar to the wedge, it ranks among the most recognized bearish reversal patterns in technical analysis.
Consequently, Bitcoin may be on the brink of an extended bear market, potentially dropping below $90. Such a decline would adversely affect the wider crypto market, as altcoins generally mirror Bitcoin’s movements.
