Yesterday’s announcement by the Federal Reserve (aka “the Fed”) — which is the central bank of the U.S. — to maintain its current monetary policy has sent ripples through the financial world, with significant implications for both traditional and digital asset markets. On 1 November 2023, the Federal Reserve (aka “the Fed”), which is the central bank of the U.S., confirmed its decision to halt rate hikes, a move that was closely scrutinized by market participants, including prominent figures in the cryptocurrency space.
As you may already know, at the press conference that followed the conclusion of this month’s FOMC meeting, Fed Chair Jereme Powell provided a comprehensive overview of the central bank’s current policy trajectory. Despite the aggressive monetary tightening that has taken place since last year, which includes a substantial 5.25 percentage point increase in the policy rate and a reduction in securities holdings by over $1 trillion, the Fed has chosen to keep the target range for the federal funds rate steady at 5.25% to 5.5%.
Powell underscored the Fed’s commitment to bringing inflation down to its 2% target sustainably. He acknowledged the economy’s resilience and the strong demand for labor, suggesting that these factors could pose risks to the inflation outlook. The Fed Chair pointed out that if growth remains above potential or if labor market tightness does not ease, it could undermine the progress on inflation, potentially prompting further policy tightening.
The Fed is also closely monitoring financial conditions, which have significantly tightened due to higher bond yields, among other factors. Powell emphasized the importance of proceeding with caution, considering the uncertainties and risks involved. The central bank will continue to base its policy decisions on incoming data and their implications for economic activity and inflation, as well as the balance of risks. The goal is to achieve a monetary policy stance that is restrictive enough to reduce inflation while keeping longer-term inflation expectations stable.
In light of these developments, Arthur Hayes, Co-Founder and former CEO of crypto exchange BitMEX, shared his perspective on social media platform X. Hayes, in a series of posts, referred to the Fed’s current approach as the “Powell Pivot,” suggesting that the central bank’s cautious progression provides insight into the potential need for further policy action, despite inflation rates remaining above the 2% target.
Hayes’s posts conveyed a sense of optimism for the cryptocurrency market, particularly Bitcoin. He indicated a strategic move to increase his investment in Bitcoin and other cryptocurrencies, colloquially known as “shitcoins,” moving away from Treasury bills. Hayes’s sentiment was buoyed by the belief that the Fed’s pause gives other central banks the opportunity to engage in monetary stimulus, predicting “massive stimulus” from China, Europe, and Japan. His concluding remark, “Money Printer Go Brrrr!!!,” encapsulates his expectation of an impending surge in liquidity, which he anticipates will benefit digital assets like Bitcoin.
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