This week was quite hectic for the crypto and traditional markets and investors will notice that as central banks introduce a new monetary expansion policy, Bitcoin (BTC) and altcoins begin to forge their own path.
Before reading the summary, catch up on the most read stories focused on Bitcoin pricing, the macroeconomic landscape and the DeFi phenomenon gaining ground.
Central bank policies first developed in the wake of the Great Recession, which were later considered extraordinary, have become ordinary, and concerns are emerging from all corners of the world.
Quantitative easing, low interest rates for extended periods, stimulus checks and other actions are increasingly being used to boost the economy, jobs and financial markets affected by governments‘ response to the COVID-19 pandemic.
This has caused the Federal Reserve and the U.S. Treasury to rewrite the rules of fiscal policy to prevent the country from sinking under the weight of what appeared to be an almost certain financial collapse.
The scope of these efforts is an abrupt change from previous measures like TARP that focused primarily on the financial industry, and has led to a pivotal moment for Bitcoin Profit and other digital assets.
That chill you’re feeling isn’t the end of summer, it’s a collective chill after the comments made this week by Fed officials in Jackson Hole.
Federal Reserve Chairman Jerome Powell acknowledged the Fed’s new approach this week and explained that the responsibility is to shore up the U.S. labor market with fewer concerns about a surge in inflation.
Revealingly, Powell acknowledged that past drops in unemployment led to concerns about rising inflation and prompted the Fed to raise interest rates; the central bank will no longer take such action.
This is a potentially frightening prospect for anyone interested in the value of money and has seen the disastrous effects of an unbridled expansion of the money supply in countries like Venezuela, Russia, Brazil and elsewhere.
The reason it is important for digital assets is twofold: technology and anti-inflationary potential – the ability to tap into unbanked communities and spread „credit and trust“.
In terms of market reaction, long-term U.S. Treasury bond yields rose to their highest levels in months on Thursday, steepening the yield curve, after Powell announced this new policy framework that promotes higher inflation to spur economic recovery and job creation.
Looking ahead, it is worth keeping a close eye on the set of commodities and also on how expectations develop. The correlations that may apply now may no longer be true, especially those related to inflation.
Not surprisingly, Bitcoin (BTC) and gold traded at a snail’s pace for most of the session, initially with a higher peak before falling to new session lows.