What everyone expected has happened. From Jackson Hole comes some anxious news for the markets and cryptocurrencies are all affected, liquefying almost all the gains of the last few weeks, with Bitcoin remaining just above $ 20,000 at the time of writing and with the rest of the sector also making worse.
Fight hard without fear of inflation, says Jerome Powell , and the markets understand it as a goblet of poison that will poison the few remaining wells. The reaction for some is strange, because in reality the position is that of Powell in the last few weeks and not in the last few days.
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Powell speaks, markets are shaking, capital is fleeing
In reality it was a horror movie that involved not only the Bitcoin and cryptocurrency market, but also the stock market, with American stock exchanges showing equally important drops.
The fear was triggered by the Jackson Hole meeting, a now classic event where the Fed's poppies meet , together with economists and journalists to discuss the current financial and economic situation. A meeting that could only be dominated by some explanations on what and how much to expect in relation to inflation and countermeasures to contain it . A meeting that threw the markets into panic due to Powell 's perceived decision to fight the price hike.
This is the key concept expressed by Jerome Powell , who recalled how vigorous action by the central bank serves to restore price stability. And this translates, taking into account the means available to the bank, in further rate hikes and in a squeeze on purchases of government bonds. Maneuvers that typically squeeze markets and cause markets to flee.
While until a few months ago the Fed's poppies persisted in describing this situation as temporary , now they seem to have finally understood that it will take some time to return to normal. And that, according to Powell, businesses and families will pay the consequences.
And that's what Powell said that at some point the speed of the hike, and therefore the hike itself, will have to be reduced. Therefore almost absolute certainty for the next 75 basis point hike and in the absence of good and convincing new news from inflation, continuation along this false line.
Inflation, Bitcoin and Ethereum: what are the correlations?
In fact, we have already talked about it in detail on the pages of Cryptocurrency : Bitcoin and crypto are not strictly anti-inflation assets and continue to behave most of the time as risk assets.
And therefore to have a clear parallel with the shares of the main exchanges. On the other hand, just look at the results of the NASDAQ yesterday, as well as those of the other stock exchanges and other US indices . All down with the crypto world and Bitcoin acting as a kind of leveraged growth index.
This is for the moment a factual truth about which there is little to discuss, unless you want to live in a fantasy world that would be more appropriate for science fiction writers than for those who want to understand how the market is moving. We can always talk about the changes that could occur in the future , as Scaramucci also did, indicating the billion wallets as a threshold that could transform this trajectory. This is not the case for now and we will have to hang on to the Fed 's decisions , which in turn are linked to what inflation and the labor market will do.
Full employment is no longer the priority
The Federal Reserve 's mandate is to seek maximum employment and the greatest possible price stability. Many seem to ignore this dichotomy. And they also seem to ignore that when price stability is out of control, you can turn a blind eye to maximum occupancy.
And this is probably, at least of sensational upheavals, the future that awaits us in the coming weeks. Weeks during which the squeeze on the economy will even be desirable for Fed policies.
Total catastrophe? No, because in reality the markets react extremely quickly to expectations and not necessarily to the actual data. And therefore, to date, they have already incorporated a not-so-exciting situation into the price. This could be a good time to consider further long positions .
