Financial experts are increasingly speculating on the potential impact of Federal Reserve monetary policy changes on the cryptocurrency industry in light of Bitcoin’s significant price shift.
Since the beginning of 2023, the price of bitcoin has risen by 30%, hitting $23,000 after briefly falling below $16,000 in late 2018.
A decrease in the U.S. Consumer Price Index, which pointed to a potential slowdown in interest rate increases, was what started the most recent rise in the alpha coin.
However, the creator and former CEO of the cryptocurrency exchange BitMex has issued a warning that if the U.S. Federal Reserve does not alter its monetary policies, Bitcoin and the market for crypto assets may see a collapse.
Former BitMex executive Arthur Hayes warns that BTC and the cryptocurrency market may be about to be engulfed by a “disastrous global financial catastrophe” in a new book on American macroeconomic policy. He claims that the recent Bitcoin price increase is not the beginning of a fresh bull run.
According to recent data from the U.S. Bureau of Labor Statistics, inflation reached its peak in the middle of 2022 at around 10% and is now moving more slowly toward the anticipated levels of 2%.
Many market watchers think this pattern may indicate that Federal Reserve Chairman Jerome Powell would change his stance on quantitative tightening (QT) in response to the possibility of a recession.
Powell predicted that rates would need to rise in 2023, and many other Fed members have also called for raising the Federal Reserve’s target rate over 5%.
A common claim is that the Bitcoin market, in particular, operates independently of central banks and other financial institutions. Additionally, because the dollar serves as the world’s reserve currency, the future direction of global USD liquidity has a significant impact on the price of bitcoin.
Recent market activity suggests that traders anticipated a change in Federal Reserve monetary policy. According to some experts, if the Federal Reserve implements a change in policy, Bitcoin’s present ascent may continue, and a “secular bull market” may develop.
According to a post on Hayes’ blog from January 19:
“If the Fed does not follow through with a pivot, or multiple Fed governors talk down any expectation of a pivot even after ‘good’ consumer price index (CPI) prints, bitcoin will likely crash back down towards previous lows”.
Despite cautioning investors to prepare for a new plateau and sideways trading until the liquidity circumstances for the U.S. dollar improve, Hayes said that the present advances may be part of Bitcoin’s recovery from its lows.
Hayes has warned of a coming market crash, but he still anticipates the Fed will act to calm the markets.
According to statistics from Coingecko, Bitcoin is currently trading at $22,794, up 9.3% over the previous seven days.