Despite concerns that the Federal Reserve may continue raising interest rates, Bitcoin has been resilient according to analysts. Last week, Fed Chairman Jerome Powell gave a speech at the annual Jackson Hole symposium, suggesting more rate hikes may be coming as the Fed attempts to reduce inflation.
Sam Callahan, lead analyst at Swan Bitcoin, noted that Powell’s words caused a “spook” among investors, resulting in a decline in Bitcoin and other asset classes. As rates increase, investors are tempted to move their funds away from riskier assets and into money market funds and Treasuries.
However, Callahan pointed out that while inflation has declined, unemployment remains low, allowing the Fed to continue raising rates to get inflation back to its 2% target.
Interestingly, Bitcoin’s reaction to key inflation data this year has been muted compared to 2022 when aggressive Fed tightening caused crypto markets to plummet. Callahan believes this could be due to more investors turning to decentralized assets such as Bitcoin and gold as hedges against the fiscal uncertainty of rising budget deficits.
When asked about potential price catalysts, Callahan suggested leveraged traders getting “wiped out” may help create an upward trend after liquidations exacerbated the downturn. He also noted the increasing institutional interest, such as BlackRock’s Bitcoin spot ETF application, which has the potential to expand access and demand from institutions.
Overall, Callahan remains optimistic about Bitcoin’s investment thesis in the face of macro uncertainty. Bitcoin’s resilience in the face of hawkish Fed signaling supports its reputation as a hedge against the mainstream monetary regime. With leveraged excesses gone and expectations of easier access, Bitcoin may be ready for its next bullish impulse.