Bitcoin, stocks and commodities corrected after Fed chairman mentions policy change

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The global financial market was hit on November 30 after comments from US Federal Reserve Chairman Jerome Powell suggested inflation and the Omicron COVID-19 variant are growing threats and money policies easy banking could end sooner than expected.

Prior to Powell’s comments, Bitcoin (BTC) was on the rise and digital assets rose 6% from a low of $ 55,840 in the early hours of trading on November 30 to an intraday high of $ 59,200 , but the price was lowered below $ 57,000 after the Fed said it.

4 hour BTC / USDT chart. Source: TradingView

At the time of writing, Bitcoin has managed to climb back up to $ 58,000, but a series of technical indicators signal traders are not confident about BTC’s next move.

Equities and commodities suffer

It’s not just Bitcoin that has been hit hard by the Fed’s comments. According to CryptoQuant economist and analyst Jan Wuestenfeld, the dollar index (DXY) rose while the DOW, gold and other stock indexes fell.

DXY vs. Gold vs. BTC / USD vs. SPX. Source: Twitter

Wuestenfeld said,

The appreciating US dollar index on Powell notes that the FED could accelerate the reduction (no matter how credible that is). Everything else goes down. Gold included.

Related: Vladimir Putin Says Cryptocurrencies ‘Carry High Risk’

The Fed “behaves in a binary way”

A more in-depth look at the Fed’s actions was provided by market analyst and former Treasury employee Nik Bhatia, who pointed out that the Fed lacks the capacity to react to dynamic conditions and instead behaves binary way.

Bhatia said,

If things go well, it may tighten the policy. If the economy is struggling, it loosens the policy.

Inflation is soaring in the United States, Bhatia says, with headline statistics showing large increases over decades in aggregate price levels.

At the same time, the Fed implemented essentially the simplest monetary policy it has ever been, leading Bhatia to warn that with the revival of inflation, this will soon end.

Bhatia said,

The Fed is clearly heading for a policy error in which it tightens its policy despite falling long-term growth and inflation expectations, due to the tightening of monetary policy itself (which is why it is calls policy error). It is no longer “transitory inflation”.

Interestingly, Powell’s comments acknowledged that the mantra of a year of transient inflation is now coming to an end, with the Federal Reserve Chairman suggesting it is time to withdraw the transitional narrative.

Federal Reserve Chairman Jerome Powell has just suggested that we stop using the word “transitional” when we talk about inflation.

I think it’s probably a good time to take that word out and try to make it clearer what we mean.

It was never transient and everyone knew it.

Pompe (@APompliano) November 30, 2021

While it’s refreshing to see a little more honesty from the Fed, cryptocurrency scholar Anthony Pompliano pointed out that the average person has known from the start that inflation is anything but transient by nature. and will likely remain an issue until 2022.

The overall cryptocurrency market capitalization now stands at $ 2.638 billion and the Bitcoin dominance rate is 41.2%.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move comes with risk, you should do your own research before making a decision.

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