The speech of Jerome Powell might influence the future of financial markets — will it help Bitcoin?
Yesterday, the whole financial world was waiting for the speech of Jerome Powell, the Chairman of the Federal Reserve. Only the waiting for his speech and the following session did already see higher volatility all across the financial markets. Bitcoin for instance increased in a matter of seconds from 11 300 to more than 11 600 dollars in the afternoon trading sessions. Shortly, it fell back down to the levels of 11 300 dollars and is currently trading at around 11 450 dollars. However, that is not the only outcome of the speech of one of the most influential central bankers of the current time.
What did Jerome Powell tell us?
The speech of Jerome Powell introduced few new concepts that are connected to the tough economical situation, which happened due to the COVID-19 and the lockdowns connected with quarantine. These restrictions negatively influenced almost all the industries, but Fed tried to deal with the economic slowdown by printing more money. However, this could not go on forever, which is why Jerome Powell introduced new ideas and plans of Fed.
Obviously, Fed is very aware of the worsening situation and that is one of the reasons why it changed its taken on inflation. First time in the modern history the Fed informed that the inflation rate will be held on the average level of 2%. Until now, the inflation policies have always tried to keep inflation below or at 2% level, depending on the country and central bank. What the target of having 2% average inflation rate means is that during some period of time, the inflation can be around 3% even 4%. In the medium to long term however, the Fed wants to keep the inflation level on the average of 2%.
The reasoning that Jerome Powell presented is that the higher inflation will help with keeping the interest rates lower and therefore help the economy to restart. This is due to the fact that the lower interest rates will encourage the households, businesses and individuals to spend the money and not to save them. This should help decrease the unemployment and recover from potential crises faster and stabilize the job markets and the economy overall.
What this means for Bitcoin and cryptocurrencies?
Simply put, encouraging the people to spend also means that people will try to invest more so that the inflation does not cost them money. That is one of the reasons why yesterdays news are very bullish for the cryptocurrency sector, as individuals might be inclined to invest into more risky investments.
What is also intriguing is the fact that people might be interested in investing in Bitcoin not only as a speculative asset, but also safe-haven asset such as gold. That is what evidence suggests, since the correlation of Bitcoin and gold has been increasing recently, reaching ATH on monthly correlation.
What does this mean for the future?
In this case, the reason for investing is not as important as the fact that individuals and households might be inclined to invest more money into Bitcoin due to the instability of inflation leading to unnecessary financial risk. That means, more people will be inclined to enter the cryptocurrency sector. And that is what Fun Gram is here to do.
Fun Gram is here to help those that do not have the necessary experience or skills needed to invest in any cryptocurrency out there. Having created the platform for social interaction between crypto enthusiasts, the project aims to connect people with different experience and levels of understanding of blockchain, FinTech, DeFi, trading or investing.
Using encryption economy, blockchain and artificial intelligence, Fun Gram combines the most recent FinTech trends together to help everyone feel welcomed and informed in the sector of cryptocurrencies. Moreover, Fun Gram connects the sectors of decentralization, payments and finance, meaning that it creates a complete ecosystem for everyone.