Fed’s Powell Confirms Rising Inflation, Could Tapering Stop Bitcoin Rally?

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Bitcoin fell 3.8% on the 24-hour chart as US Federal Reserve Chairman Jerome Powell gave a speech on the current economic outlook. At the time of going to press, the crypto market has reacted negatively to Powell’s statements, as intuition is finally hinting at a possible start of a reduction.

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According to a Reuters report, the Fed chairman said the following on inflation, high investor expectations on the metric pushed the price of Bitcoin to new highs in 2021:

Supply constraints and high inflation are expected to last longer than expected and into next year, and so are the pressures on wages.

Powell has taken a 180-degree turn from previous statements. The phrase “inflation is transient” has been associated with the inability of Powell and the Federal Reserve to take control of the economy.

The FED is also facing a current scandal because many of its members at national and state levels would have benefited from taking a stand before the major announcements made by the institution. This has brought millions of earnings to many of its high ranking members.

As Bitcoinist reported, math artist Nelson Saiers embodied the apparent general sense of distrust of the US FED with his latest coin: an inflatable Bitcoin rat spot on the institution’s building in New York City. The book attempts to capture the damage done to the reputation of the FED over the years.

BTC tends to fall in the daily chart after the FED hinted that it is going to fall. Source: BTCUSD Tradingview

The Fed presidency has tried to take further steps to stop similar actions in the future, but the lady seems too tall to be fixed in the short term. Ryan Selkis, founder of crypto research firm Messari, commented on the following on Powell’s inflation reports and the institution’s overall performance:

Bitcoiners have told you the truth. The Fed lied or was so bad at its job that everything should be fired. Either way, bitcoiners have told you the truth.

Bitcoiners have told you the truth.

The Fed lied or was so bad at its job that everything should be fired. Either way, bitcoiners have told you the truth. https://t.co/iR5PJVFpCq

– Ryan Selkis (@twobitidiot) October 22, 2021

Bitcoin with more downside risk

Lack of confidence, inflation expectations and a possible beginning of a reduction create a solid cocktail, as Bitcoin tends to fall in shorter time frames.

While inflation is key, the Fed’s injection of liquidity into global markets through its asset purchase program has given the crypto and mainstream market a big boost.

Related reading | Walmart Hosts 200 Bitcoin ATMs: Easy-to-Use Options Diversify Users

So any change in this dynamic through the implementation of tapering in 2022 could jeopardize Bitcoin’s race going forward.

In the short term, Bitcoin looks in danger of further falling, but with signs of strength at the bull’s corner. QCP Capital records an increase in leverage for the futures sector, as seen below.

Source: Skew via QCP Capital

Aggregated open interest (OI) for Bitcoin Futures has exceeded 400,000 notional BTC, the company said. This metric is very close to its previous all-time high and is accompanied by an increase in funding rates for perpetual BTC contracts, but very far from its April levels, just before the Bitcoin crash.

QCP Capital added the following on the possibility of BTC price resuming its rally:

This means that there may still be room for some additional euphoria, but we are at levels that are starting to stretch the market.

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