Bitcoin, as of late, has been seen by investors as a tool that can potentially hedge wealth against inflation and other economic problems. It looks like that attitude towards the cryptocurrency is likely to continue in America for some time considering the new warning by Federal Reserve Chair Jerome Powell.
Jerome Powell: The Economy Is Still Weak
Yesterday, Powell emerged to warn U.S. citizens that the economy is slated to face weak growth in the coming months “without modern precedent.” He explained that there are still risks associated with the coronavirus and growing tensions with China, sparking ideas that a cold war between both east and west could occur.
He has also stated that while the Fed has slashed rates and U.S. regulators have worked hard to ensure stimulus money and relief aid for Americans and small businesses, more may be necessary down the line. He explained:
While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks. There is a sense – a growing sense I think – that the recovery may come more slowly than we would like, but it will come, and that may mean that it’s necessary for us to do much more.
Marcus Swanepoel – the chief executive of a cryptocurrency exchange in the U.K. – stated in an interview:
Yesterday, Powell warned about the economic risks from COVID-19 and increased tensions with China, which could lead to liquidity issues. In response, global markets fell quickly, and cryptocurrencies found buyers.
As a result, assets like bitcoin have been on the rise over the past 24 hours, with the currency once again spiking well above $9,000 and flirting with $10K for the second time in a month. At the time of writing, bitcoin is trading for well over $9,600 – a spike of nearly $400 from yesterday.
Alex Kuptsikevich – senior financial analyst at FX Pro – comments:
If bitcoin can go above the big, round level $10,000, it will give hope to the whole crypto market.
Stocks and Crypto Aren’t Correlating
Sadly, the results surrounding bitcoin are not being emulated in the stock market. The Dow Jones fell by more than 500 points yesterday following the warning by Powell, while the S&P 500 dropped by nearly two percent. Mati Greenspan – founder of Quantum Economics – stated:
Wall Street did not seem happy about the Fed’s statement. Not the warnings and not the unwillingness to provide an easy way out. Stock indices are down more than one percent. On the other hand, bitcoin and the digital markets are up. Quite a welcome contrast to the tight correlation we’ve experienced since the start of the corona crisis. In fact, the entire halving event seems to have had a rather liberating effect on the digital asset space.