Robert Steinadler, 2 months ago
Jerome Powell gave another speech and the markets reacted again. There is simply too much tension at the moment since most investors are on the edge of their seats to learn whether the rate hikes are going to continue or not. It looks like things could turn out well and inflation will be a thing of the past by next year. On the other hand, most investors fear a larger recession that could bust the economy for good.
How to deal with these mixed signals and what had Jerome Powell to add during his last speech?
Powell reiterated the goals that the FED set out in December 2021. Meeting a 2% target for inflation is the most important task and since inflation could erode the economy, Powell asked the audience at the Economic Club of Washington last Tuesday to be patient.
While the FED went easy with the last rate hike and lowered it down to 25 bps, Powell made it clear that further rate hikes would be necessary and that the FED could raise rates more drastically if needed. He put also things into perspective saying that 2024 would be the earliest opportunity to expect the 2% target to be met.
This does not sound bullish at first glance, but it raised hopes that 2024 could be indeed the end of the struggle. In effect, the stock markets reacted positively to this news.
While the stock markets reacted positively, crypto had to face yet another rodeo. Bitcoin fell under $23,000 again and it seems that at least for now $24,000 is the ceiling of the current range. Other crypto assets also went wild. The volatility left derivatives traders with a giant loss, liquidating positions worth over $84 million within 24 hours after the speech.
Of course, investors holding cryptocurrencies in their wallets were not affected in the same way and prices normalized after the dust cleared and volatility decreased.
There were also a couple of notable success stories such as the SAND token that profited from an MOU between Saudia Arabia and the Sandbox. Next week US CPI data will be released and the results will determine if investors remain confident that the FED is on track or if they perceive inflation as a persistent threat that will be around for a while longer.
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Will the American Central Bank on Wednesday raise interest rates with another 0.25%? In a banking sector that's under severe stress, even higher interest rates could squeeze banks and even undermine trust in the entire financial system. At the same time, inflation hasn't come down to the target of 2%, which demands more interest rate hikes - at least in the opinion of the Fed.
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ChatGPT is perhaps the hottest overall tech trend this year. Everybody is using it and everybody is discussing its limitations, bias, and capabilities. AI is not only changing how we are using our computers or the internet. It will also change how we work. ChatGPT is already able to design and program applications, websites, and even news articles. This is astonishing and promising at the same time. It looks like the hype has also reached crypto and once again AI related tokens were pumping on news.
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