A week has passed since US President Joe Biden took office. The crypto market and other markets are waiting to see if Biden will continue with a similar monetary policy implemented by the Trump administration.
Analysts seem to agree that the US government can not only continue the “eternal monetary policy”, but further expand the money supply. Federal Reserve Governor Jerome Powell is expected to comment on the US economic outlook today.
We can say that Bitcoin has benefited from the Fed’s increasing money supply and policies in the past. Just like gold, cryptocurrency has been deemed a safe haven by institutions. Over time, this thesis grew stronger and attracted more attention from institutions that pushed the Bitcoin price to an all-time high. Powell can take a moderate stance, stating that the main strategy of the organization is not to increase debt immediately, in his statement. In the short term, this could affect the Bitcoin price consolidating at the low $ 30,000 level. The market seems pending on what measures the Fed will take.
According to Yohay Elam of FXStreet, Powell could indirectly signal a desire to buy more bonds by demanding more financial (government) spending, in which case inflation protections such as Bitcoin and gold could manifest. As noted by Elam, Joe Biden is pushing for a $ 1.9 trillion stimulus package and the government needs to find financing for that extra debt.
As we mentioned above, the central bank incentive during the pandemic has created enthusiasm in various asset classes, including Bitcoin. Stock markets, in particular, took off as some tech stocks like GameStop witnessed the retail craze. Therefore, Powell may also try to calm the markets. “Any hint that the Fed does not want to continue printing money out of fear of balloons will pull [the markets] down,” Elam said.
Bitcoin is currently trading in the $ 30,000 to $ 35,000 range created in the past four days and dropped below $ 29,000 on Friday. Analysts predict that signs of weakening institutional demand will generate more sales. We can say that Powell’s statements are awaited with great curiosity.