A slight surge in Bitcoin, which was nearing the $86,000 mark, quickly reversed during the U.S. afternoon trading session after Federal Reserve Chair Jerome Powell expressed concerns about the impacts of President Trump’s tariff policies.
“The level of the tariff increases announced so far is significantly larger than anticipated,” said Powell in a speech. “The same is likely to be true of the economic effects, which will include higher inflation and slower growth.”
In other words, stagflation — reminiscent of a considerable part of the 1970s when the U.S. faced sluggish economic activity paired with double-digit inflation.
“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” Powell continued.
The Bitcoin price plummeted approximately 2.5% immediately after Powell’s comments, trading now at $83,700, which is down 1.5% over the past 24 hours.
U.S. stock markets, which were attempting a recovery from losses at the opening bell, were also affected, with the Nasdaq index declining by 3.4% to a day’s low.
Powell indicated a necessary legal framework for stablecoins as cryptocurrencies become increasingly mainstream, noting that regulations surrounding crypto may see partial relaxation.
The U.S. Senate Banking Committee recently cleared a bill aimed at regulating stablecoin issuers, marking a significant legislative advancement.
“Powell came out extremely hawkish,” Quinn Thompson, CIO of Lekker Capital, expressed via Telegram. He noted it was surprising that Powell overlooked last week’s market disturbances, referring to it merely as “orderly market functioning.”
Thompson mentioned that Powell’s stance may temper expectations for interest rate cuts in upcoming meetings, which could consequently impact risk assets, including cryptocurrencies.
“It appears a May cut is firmly off the table barring Federal intervention for bad reasons, and I wouldn’t say June is guaranteed either,” concluded Thompson. “The favorable outlook for crypto, particularly Bitcoin, relies on liquidity and intervention from policymakers - both seem unlikely in the near term.”
