Bitcoin price quickly fell from over $63,000 to $62,300 as this article was being prepared. We have become accustomed to such declines, some reaching or exceeding $1,000. These sharp falls following weak recoveries significantly impact investors‘ risk appetite. The reason for this drop could be the statements made by Fed members at the time of writing.
Why Are Cryptocurrencies Falling?
At the end of last year, investors who thought the Fed would make a 150bp cut by 2024 had doubled their predictions to a 75bp cut. However, following the inflation data from the first quarter, the expectation for interest rate cuts this year has already fallen to 50bp, below the Fed’s expectations.
As this article was being prepared, Fed’s Logan stated;
“The first quarter inflation data was disappointing. While the labor market and economy are strong, we have made significant progress on inflation. However, there are significant upward risks to inflation. There are uncertainties about whether the policy is restrictive enough. It’s too early to consider lowering interest rates. There is no soft landing yet. I still see good reasons for inflation to reach 2%. The neutral interest rate level may have risen. A strong economy could be a sign of a higher neutral interest rate. Considering the high interest rates, the resilience of the economy is surprising.”
From the messages he gave at the beginning of his statements, Logan seems to be able to bring up an interest rate hike at the next stage. While Fed’s Kashkari highlights the importance of artificial intelligence for efficiency, another Fed member Bowman said;
“We need to keep monetary policy steady for a while longer. There is ongoing momentum in the economy.”
Following all these statements, BTC fell while ETH price dropped back below $3,000.
