The Fed's 'Shock' Warning Poses a Risk of Crashing Bitcoin and Altcoin Prices

After Donald Trump announced the Liberation Day tax rate, Bitcoin and most alternative coins outperformed stocks. Bitcoin ( BTC ) is still holding at a level between 80,000 and 90,000 dollars, while Ethereum ( ETH ) is still just under 2,000 dollars. The total market capitalization of all cryptocurrencies has decreased from 2.7 trillion dollars to 2.6 trillion dollars. Meanwhile, the stock market has had its worst week since 2020. The Nasdaq 100, S&P 500, and Dow Jones indices all plunged into a correction phase.

Fed’s Shocking Warning About Stagflation Bitcoin and other cryptocurrencies may face pressure after Federal Reserve Chairman Jerome Powell warned that Trump’s tariffs could lead to higher inflation and slower growth for the U.S. economy. Powell said on Friday: “Our duty is to maintain long-term inflation expectations at a stable level and ensure that a one-time price increase does not become a persistent inflation problem.” High inflation and high unemployment can lead to stagflation, which is very difficult to control because actions taken to address one issue - such as lowering interest rates to boost growth - can exacerbate another issue, such as inflation, and vice versa. Powell warns that he is not in a hurry to cut interest rates because inflation remains high. His statement reflects the views of other officials like Raphael Bostic and Adriana Kugler, who have supported higher interest rates for a longer period to combat inflation. However, Trump disagreed. “This will be the PERFECT time for Fed Chairman Jerome Powell to cut interest rates,” Trump wrote on his social media platform, accusing Powell of “playing politics.” The Board of Governors of the Fed is an independent government agency. Observers note that a more hawkish Fed, at a time when analysts predict a recession, will negatively impact the prices of Bitcoin, altcoins, and stocks. Historically, these assets perform well when the Fed cuts interest rates. The most recent check on Saturday showed Bitcoin trading at around $83,435. See below.

The bond market and crude oil prices provide a cushion On a positive note, leading indicators suggest that the Federal Reserve will cut interest rates sooner. Crude oil prices have fallen sharply in recent days, with Brent, the global benchmark, dropping to $64 on Friday. West Texas Intermediate fell to $62. In addition, the coin, often considered a measure of the global economy, has also plummeted. These assets indicate the potential for a recession as demand from individuals and companies diminishes. The bond market is also sending a similar message as the yields on the 10-year and 2-year bonds decreased to 3.95% and 3.5%, respectively.

These signals indicate the possibility that the Fed will be dovish and may soon begin to cut interest rates. In a statement earlier this week, Goldman Sachs raised the probability of a recession in the United States and predicted that the Fed will implement at least three rate cuts by the end of this year. History shows that risky assets such as stocks, Bitcoin, and altcoins perform well when the Fed cuts interest rates. For example, all surged in 2020 when the Fed made emergency interest rate cuts as the pandemic began. Stocks also experienced a decade-long bull run when the Fed cut interest rates during the Global Financial Crisis. ⚠️IMPORTANT! If you like this topic, don’t forget: • Follow me @blogtienso for more interesting content! • Like, share, and leave a comment 💖 and don’t forget to DYOR! #Write2Earn #Write&Earn $BTC {spot}(BTCUSDT)