Powell Doubles Down On Inflation Expectations, Bitcoin Drops

Powell doubles down on the inflation expectations as the heightened one makes up the strongest bullish case for BTC which poses the safest insurance against a rise in consumer prices and fiat devaluation that was caused by the easing programs and the stimulus packages, so let’s read more in our latest BTC news today.

Bitcoin faced a headwind while trying to continue its yearlong upside rally higher and the cryptocurrency dropped right after Powell testified to Congress, emphasizing that the $1.9 trillion stimulus package won’t lead to an unwelcomed spike in inflation:

 “We might see some upward pressure on prices. Our best view is that the effect on inflation will be neither particularly large nor persistent.”

BTC was trading below $56K ahead of Mr. Powell’s testimony but then it came under pressure after the governor made comments on inflation, pointing to a short-term jitteriness among traders basing their upside theories on the higher inflation rates. The cryptocurrency came with a limited supply cap of 21 million tokens which get halved every four years because of its algorithm in its source code.

This makes BTC scarcer than gold as its top rival in the safe-haven market and the dollar weakened by 12% from the March high after the FED’s response to the loose monetary policies and the US government’s trillions of dollars worth stimulus packages. The BTC/USD pair surged by more than 600 percent in the same time and the pair then climbed while coinciding with the spike in the inflation rate from 0.
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63% in March 2020 to 2.29 percent a year later. The reading was above the inflation target of 2% which points that it will unwind the loose monetary policies by raising the benchmark rates.

Last week, the FED officials stated that the end of the policy meeting will tolerate interest rates near zero in the next four years. This, coupled with Powell’s commitment to control the inflation rates, indicator low chances of dramatic consumer price spikes which will turn the dollar stronger and will reduce the appetite for BTC among investors in the states. As Powell doubles down on the inflation expectations, BTC dropped slightly and the stock-to-flow model creator referred to the European Central Bank quote, saying that the central banks have more room to expand their asset purchasing programs because the rates are too low:

 “It means more pandemic emergency purchase programs. This is good for Bitcoin.”