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Fed members have done it again, Bitcoin is falling again. Moreover, despite two days of positive data. Behind the sales in cryptocurrency markets lies the timidity of investors who want to reduce their risk. Until the June meeting, the Fed may continue to make similar moves to suppress possible excessive optimism.
Why are Cryptocurrencies Falling?
Bitcoin price fell below $27,000 again and hit $26,952. In the short term, the loss of the $27,200 level suggests that a bigger sell-off could be on the way. If the negative sentiment on the BTC front continues in this way, we may see a bigger wave of sales towards $25,000.
There is of course a reason why cryptocurrencies have been falling despite two days of positive data. That is the statements made by Fed members on Tuesday and today. While the data says that it is time for the Fed to announce the interest rate ceiling, Fed members are suppressing the markets.
Fed Statements
Fed member Kashkari made statements that caused cryptocurrencies to fall. Although the data is good, investors are worried as the dose of statements made by members increases. So what did Kashkari say today?
“The inverted yield curve is putting real pressure on banks. Inflation is falling, but it has been quite persistent. And that means we’re going to have to continue for a long time. We are following the debt ceiling debate closely, but it is up to the executive branch and congress to resolve it. My guess is that once this period of high inflation is over, we will return to a low inflation and low interest rate environment. I don’t see evidence of a collapse in consumer spending or a slowdown in the service side of the economy. I’m currently at the more hawkish end of the Fed policy spectrum. My policy expectations are driven by data. If higher inflation becomes more entrenched, rates will need to stay higher for longer. If the markets are right that inflation will fall rapidly, one could think that rates could normalize. I’m not convinced that we have reached maximum employment. It’s conceivable that once we get inflation down to 2% we could have a conversation about changing the target. The Fed’s 2% inflation target is here to stay for the near future. Bank turmoil could be a source of slowdown for the economy. Inflation has eased but remains well above the Fed’s 2% target. Wage growth has softened somewhat and the labor market is strong.”
Since Kashkari said that the interest rate ceiling is nowhere near, markets are pricing in the possibility of another hike in June.
