Bitcoin and ethereum have come under severe pressure this year as the Federal Reserve hikes interest rates to levels not seen for over a decade (though Elon Musk has given one small cryptocurrency a 300% price boost).
The bitcoin price, having surged to almost $70,000 per bitcoin last year, has crashed to around $17,000, while the ethereum price has suffered a similar sell-off—causing one legendary investor to issue a shock price prediction.
Now, “desperate” traders and investors are nervously waiting for Fed chair Jerome Powell to make a speech in which he could signal a slowdown of rate hikes followed by Friday’s U.S. jobs report that will likely influence next month’s looming Fed meeting.
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“Investors will be watching closely for clues from Fed chair Jerome Powell during his speech later in Washington, DC,” Susannah Streeter, senior investment and markets analyst at brokerage Hargreaves Lansdown, wrote in emailed comments. Powell is speaking on Wednesday afternoon at the Brookings Institution amid rising recession expectations and signs this year’s runaway inflation is cooling.
After four consecutive 0.75 percentage point interest rate hikes this year, the futures market has priced in a roughly 70% chance that the Fed will deliver a 0.5 percentage point increase at its December meeting. Friday’s jobs report is expected to show an addition of 200,000, down from 261,000 last month, which would be the lowest number of 2022 and would give the Fed further reason to soften its hawkish approach.
“They are desperate for indications about the trajectory of rate rises and how high they will have to go to bring down the price spiral. Although super-sized rate hikes appear to be in the rear-view mirror, an increase of 0.5% is still expected in December with the tightening cycle considered to be far from complete.”
The Federal Reserve has this year embarked on a brutal series of interest rate hikes designed to suck liquidity out of the system after it became awash with cash during the Covid crisis.
The tightening of monetary policy has driven down stock markets that had surged higher over the last two years and wiped around $2 trillion from the previously red-hot combined bitcoin, ethereum and crypto market.
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However, investors are increasingly predicting markets are bottoming out, with some forecasting a 2023 bitcoin price rally that is “steadier” than 2021’s “high-octane rush.”
“Confidence is creeping back into the markets,” Nigel Green, the chief executive of deVere Group, said via email. “We expect as the program unwinds, which is likely to be in the second quarter of 2023, these will be the assets that will experience some of the biggest rallies.”
However, “the high-octane rush of previous rallies is unlikely, instead we will see a steadier, continued upward trajectory for bitcoin when the unwind kicks off,” Green added.