Bitcoin and cryptocurrency prices are reeling from a huge hack of the Dubai-based Bybit exchange amid fears of bitcoin price “suppression.”
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The bitcoin price was sent briefly spiraling on Friday after the hack was revealed, though it’s recovered as bitcoin-backing U.S. senator Cynthia Lummis primes the market for a major legislation update.
Now, as Elon Musk appears to be plotting a massive overall of the Federal Reserve, economists are warning a “nightmare” scenario for the Fed could be about to hit the price of bitcoin.
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Federal Reserve chair Jerome Powell is grappling with looming stagflation, something that could play … [+]
Last week, a Bank of America survey of global fund managers found those expecting stagflation—defined by the bank as below-trend growth and above-trend inflation—to hit the U.S. economy within the next year has climbed to a seven-month high.
The Fed kicked off an interest rate cutting cycle in September but has since pumped the brakes as inflation fears return, putting a dampener on the bitcoin price rally.
“Markets are now pricing in a 97.5% chance of no change to interest rates at the Fed’s next meeting in March whereas one month ago it was a 75.5% probability,” Dan Coatsworth, investment analyst at AJ Bell, said in emailed comments. “We’re now looking at a situation where U.S. rates might not be cut again until much later in 2025, if at all.”
This coming week, the Federal Reserve’s preferred measure of inflation—the personal consumption expenditures (PCE) price index—is expected to show inflation is still above the Fed’s 2% target.
“Stagflation has definitely re-emerged as a possibility because we have these policies that could hurt consumer demand even while persistent inflation limits the Federal Reserve’s ability to maneuver,” Jack McIntyre, portfolio manager for Brandywine Global’s fixed income strategies, told Reuters. “What continues to concern us more than the risk of inflation is stagflation,” Tim Urbanowicz, chief investment strategist at Innovator Capital Management, added.
Meanwhile, Jon Brager, a portfolio manager at Palmer Square Capital Management, told Quartz the Fed could even hike interest rates this year.
Fed chair Powell risks provoking U.S. president Donald Trump if the Fed doesn’t resume interest rate cuts soon, with Trump posting to X that “interest rates should be lowered,” following the Fed’s decision to leave them on hold earlier this month.
“Investors are in a ‘wait-and-see’ mode right now trying to balance optimism around institutional inflows, especially from bitcoin exchange-traded funds (ETFs), with macroeconomic uncertainties, a potential global trade war and interest rate decisions from the Federal Reserve,” James Toledano, chief operating officer at bitcoin and crypto platform Unity Wallet, said in emailed comments.
“A major price crash seems fairly unlikely in the short term unless a significant macroeconomic, geopolitical shock or regulatory shift occurs and in saying that most are betting on favorable regulatory shifts, especially in America.”
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The bitcoin price rally has stalled over the last few months.
The bitcoin price has been languishing under $100,000 per bitcoin through February, raising the risk for some analysts that the bitcoin price might make a major move this week.
“Bitcoin continues to move strictly to the side, while the crypto market dynamics generally resemble a bouncing ball, getting lower and lower over time,” Alex Kuptsikevich, FxPro chief market analyst, said in emailed comments.
“The local resistance has moved to the $3.20 trillion area, while the lower boundary has remained near $3.10 trillion for the last three weeks. Thus, the market is accumulating risks that we will get a compressed spring effect with a sharp move in one direction in the coming days.”
