he will appear before the House Financial Services Committee. During his testimony, Powell warned that the US economy was still a long way from achieving the Federal Reserve’s goals of maximum employment and stable prices.
He also acknowledged that inflation could rise in the short term due to temporary factors such as supply chain disruptions and pent-up demand, but he reiterated that the Fed would not raise interest rates until it saw sustained inflation above its 2% target and full employment.
However, his cautious tone and emphasis on the need for continued policy support seemed to have spooked investors, who had been betting on a faster economic recovery and higher interest rates.
As a result, Bitcoin and other cryptocurrencies fell sharply, with Bitcoin dropping to lows of $22,120, down more than 10% from its recent highs. The broader crypto market also saw significant losses, with Ethereum, Binance Coin, and Cardano all down more than 5%.
Meanwhile, US stocks also retreated from their recent highs, with the S&P 500 falling 1% and the Nasdaq Composite dropping 2%. The sell-off was led by technology and growth stocks, which had been among the biggest beneficiaries of the low interest rate environment.
Investors are now likely to turn their attention to the next Fed meeting in March, where Powell and his colleagues will have to decide whether to maintain their current policy stance or start tapering their asset purchases in response to rising inflation expectations.
Some analysts believe that the recent market volatility could be a sign of things to come, as investors grapple with the prospect of higher inflation and interest rates in the months ahead. Others, however, remain optimistic about the long-term prospects of both crypto and stocks, citing their resilience and potential for growth in a post-pandemic world.
