Bitcoin has found some stability after a tumultuous period, thanks to an unexpected boost from Tesla’s billionaire CEO, Elon Musk.
The current price of bitcoin hovers around $112,000 per coin. This comes after fears it might drop below $110,000 yesterday despite significant warning signs in the market.
Following a sudden “flash crash” that prompted a stern caution from BlackRock, Federal Reserve Chair Jerome Powell announced that the Fed is nearing the end of its quantitative tightening program aimed at reducing its balance sheet.
“Our long-standing strategy is to halt balance sheet reduction when reserves are slightly above what we consider sufficient,” Powell stated during his speech at the National Association for Business Economics conference in Philadelphia. His remarks were reported by CNBC, and he hinted at potential interest rate cuts as well.
“We could reach this point in upcoming months and are carefully observing various indicators to guide our decision.”
The Fed’s quantitative tightening initiative started in 2022 and has brought down its balance sheet from approximately $9 trillion to $6.6 trillion.
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“Powell delivered a speech highlighting concerns about recent declines in the U.S. labor market,” noted David Morrison, senior market analyst at Trade Nation, via email comments.
“The focus for the Fed has shifted from inflation—which remains significantly above their 2% target—to labor market conditions. Markets anticipate two more 25 basis point rate cuts before year-end. However, Powell emphasized quantitative tightening—reducing the Fed’s balance sheet—which expanded dramatically during both the Great Financial Crisis and Covid-19 panic periods but is now being cautiously decreased.”
This gradual winding down of quantitative tightening coincides with expectations for another interest rate cut by the Federal Open Markets Committee (FOMC) later this month while bitcoin ETFs have surged as Wall Street institutions invest heavily.
“This institutional momentum combined with September’s dovish stance by The Federal Reserve amid ongoing macroeconomic uncertainties like potential U.S government shutdowns strengthens Bitcoin’s position alongside gold—a traditional safe haven asset which recently surpassed $4k/ounce,” explained Gadi Chait Head Investment Officer Xapo Bank through email communication.
“As ‘Uptober’ unfolds it will be intriguing if any substantial upward movement occurs due largely because developments surrounding FED policies scheduled October28-29 FOMC meeting potentially act catalyst extending rally or prompting healthy consolidation.”