Fed Chair Powell’s Remarks Trigger Bitcoin Sell-off

Jerome Powell, Federal Reserve Chair

According to CoinCarp.com, the price of Bitcoin (BTC), the leading cryptocurrency, dropped to $26,900 on Wednesday after the U.S. Federal Reserve announced its latest monetary policy decision and outlook. The Fed, which is the central bank of the U.S., decided to keep its key interest rate unchanged at 5.25% to 5.50%, as widely expected by the market. However, the Fed also revealed that it expects to raise its interest rate to 5.1% by the end of next year, which is higher than its previous projection of 4.3% in June. The Fed also revised its estimate for the U.S. economic growth for this year to 2.1%, up from 1% in June.

The Fed's interest rate affects the cost of borrowing and lending in the U.S. economy, and also influences the value of the U.S. dollar and other currencies. A higher interest rate tends to strengthen the dollar and make other assets, such as Bitcoin, less attractive for investors.

In a press conference after the policy announcement, Fed Chair Jerome Powell said that the central bank will adjust its policy according to the economic conditions and inflation trends. He said that if the economy continues to perform better than expected, the Fed will raise its interest rate more aggressively to prevent inflation from rising too high. He also said that most of the Fed members believe that "one more rate hike is more likely than not appropriate" before the end of this year, implying that there could be another rate increase in either November or December. He praised the recent inflation data, saying that they showed that inflation was moving closer to the Fed's target of 2%.

Bitcoin's price was relatively stable around $27,200 before the Fed’s announcement, but fell about 1% after Powell’s comments. The market participants seemed to be surprised by the Fed’s hawkish tone and outlook, which suggested that the Fed was more confident about the U.S. economic recovery and more willing to tighten its monetary policy sooner than later.

According to the CME’s FedWatch tool, which tracks the market expectations for the Fed’s interest rate, there is about a 71.5% chance that the Fed will keep its interest rate unchanged at its next meeting in November, and a 53.4% chance that it will do so until the end of this year. However, these probabilities could change depending on the upcoming economic data and events.