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CoinDesk 2025-04-16 17:59:21

Bitcoin Rally Short-Circuited as Fed Chair Powell Raises Stagflation Fear

A modest bitcoin rally to a possible challenge of the $86,000 level quickly reversed during U.S. afternoon trading hours on Wednesday as Federal Reserve Chairman Jerome Powell warned on the effects of President Trump's tariff regime. "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 — a throwback to a sizable portion of the 1970s when the U.S. experienced weak economic activity alongside double-digit inflation. "We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension," continued Powell. The price of bitcoin (BTC) fell about 2.5% in the minutes following the Powell remarks, now trading at $83,700, down 1.5% over the past 24 hours. U.S. stocks, which had been trying to mount a comeback from opening declines, also were hit, the Nasdaq slumping 3.4% to a session low. Powell also mentioned that as crypto is becoming more mainstream, there's a need for a legal framework for stablecoins. He said that banking regulation around crypto will likely be “partially relaxed.” The U.S. Senate Banking Committee cleared a bill to regulate stablecoin issuers in March, marking the first committee approval and a significant step closer to law in the U.S. Hawkish Fed weighs on crypto and BTC "Powell came out extremely hawkish," Quinn Thompson, chief investment officer of hedge fund Lekker Capital, said in a Telegram message. It's notable that Powell downplayed last week's market turmoil characterizing it as "orderly market functioning," he added. "I would have at least expected him to give a nod to the elevated volatility and ruptures forming in the treasury market but he did not do that," Thompson said. Powell's tone suggests that investors should temper their expectations for rate cuts in the upcoming meetings, said Thompson, which could weigh on risk assets including crypto. "It appears a May cut is firmly off the table barring Fed intervention for bad reasons and I wouldn't say June is a lock either," concluded Thompson. "The bull case for crypto and bitcoin specifically is liquidity and policymaker intervention. Both of those seemed very far off based, so it's difficult for me to paint a constructive picture in the immediate term." UPDATE (April 16, 18:40 UTC): Adds additional comments made by Chair Powell about stablecoins. Adds analyst comment.

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