{"id":11061,"date":"2022-05-24T22:29:07","date_gmt":"2022-05-24T22:29:07","guid":{"rendered":"https:\/\/nftandcrypto-news.com\/crypto\/low-inflation-or-bust-analysts-say-the-fed-has-no-choice-but-to-continue-raising-rates\/"},"modified":"2022-05-24T22:29:08","modified_gmt":"2022-05-24T22:29:08","slug":"low-inflation-or-bust-analysts-say-the-fed-has-no-choice-but-to-continue-raising-rates","status":"publish","type":"post","link":"https:\/\/nftandcrypto-news.com\/crypto\/low-inflation-or-bust-analysts-say-the-fed-has-no-choice-but-to-continue-raising-rates\/","title":{"rendered":"Low inflation or bust: Analysts say the Fed has no choice but to continue raising rates"},"content":{"rendered":"
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As economic conditions continue to worsen, financial experts worldwide are increasingly placing the blame at the feet of the United States Federal Reserve after the central bank was slow to respond to rising inflation early on. <\/p>\n

Financial markets are currently experiencing their worst stretch of losses in recent history, and it doesn\u2019t appear that there is any relief in sight. May 24 saw the tech-heavy Nasdaq fall another 2%, while Snap, a popular social media company, shed 43.1% of its market cap in trading on May 23.\u00a0<\/p>\n

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This past couple of months have been absolutely brutal for the markets\u2026 8 consecutive weeks of red candles in the #SPX<\/a>, #NASDAQ<\/a> and #BTC<\/a>\u2026 no significant bounces pic.twitter.com\/hgU2VwIoxh<\/a><\/p>\n

\u2014 Crypto Phoenix (@CryptoPheonix1) May 24, 2022<\/a><\/p><\/blockquote>\n

Much of the recent turmoil again comes back to the Fed, which has embarked on a mission to raise interest rates in an attempt to get inflation under control, financial markets be damned.\u00a0<\/p>\n

Here\u2019s what several analysts are saying about how this process could play out and what it means for the price of Bitcoin (BTC) moving forward.\u00a0<\/p>\n

Will the Fed tighten until the markets break?<\/h2>\n

Unfortunately for investors looking for short-term relief, economist Alex Kr\u00fcger thinks<\/a> that \u201cThe Fed will not stop tightening unless markets break (far from that) or inflation drops considerably and for *many* months.\u201d<\/p>\n

One of the main issues affecting the psyche of traders is the fact that the Fed has yet to outline what inflation would need to look like for them to take their foot off the rate-hike gas pedal. Instead, it simply reiterates its goal \u201c’to see clear and convincing evidence inflation is coming down’ towards its 2% target.\u201d<\/p>\n

According to Kr\u00fcger, the Fed will \u201cneed to see Y\/Y [year-over-year] inflation drop 0.25%\u20130.33% on average every month until September\u201d to meet its goal of bringing down inflation to the 4.3%\u20133.7% range by the end of the year. <\/p>\n

Should the Fed fail to meet its PCE inflation target by September, Kr\u00fcger warned about the possibility that the Fed could initiate \u201cmore hikes *than what\u2019s priced in*\u201d and also begin exploring the sale of mortgage-backed securities as part of a quantitative tightening campaign. <\/p>\n

Kr\u00fcger said:<\/p>\n

\u201cThen markets would start shifting to a new equilibrium and dump hard.\u201d<\/p><\/blockquote>\n

A setup for double-digit sustained inflation<\/h2>\n

The Fed\u2019s responsibility for the current market conditions was also touched on by billionaire investor and hedge fund manager Bill Ackman, who suggested<\/a> that \u201cThe only way to stop today\u2019s raging inflation is with aggressive monetary tightening or with a collapse in the economy.\u201d<\/p>\n

In Ackman\u2019s opinion<\/a>, the Fed\u2019s slow response to inflation has significantly damaged its reputation, while its current policy and guidance \u201care setting us up for double-digit sustained inflation that can only be forestalled by a market collapse or a massive increase in rates.\u201d<\/p>\n

Due to these factors, demand for exposure to stocks has been muted in 2022 \u2014 a fact evidenced by the recent decline in stock prices, especially in the tech sector. For example, the tech-heavy Nasdaq index is now down 26% on the year.\u00a0<\/p>\n

With the cryptocurrency sector being highly tech-focused, it’s not surprising that weakness in the tech sector has translated to weakness in the crypto market, a trend that could persist until there is some form of resolution to high inflation. <\/p>\n

Related: <\/em><\/strong>Bitcoin price returns to weekly lows under $29K as Nasdaq leads fresh US stocks dive<\/em><\/strong><\/p>\n

How could Bitcoin fare going into 2023?<\/h2>\n

According<\/a> to Kr\u00fcger, the \u201cbase case scenario for upcoming price trajectory is a summer range that starts with a rally followed by a drop back to the lows.\u201d<\/p>\n

BTC\/USDT 1-day chart. Source: Twitter<\/em><\/figcaption><\/figure>\n

Kruger said:<\/p>\n

\u201cFor $BTC, that rally would take price to the start of the Luna dump (34k to 35.5k).”<\/p><\/blockquote>\n

Crypto trader and pseudonymous Twitter user Rekt Capital offered further insight into the price levels to keep an eye on for a good entry point moving forward, posting the following chart showing Bitcoin relative to its 200-day moving average. <\/p>\n

\"\"
BTC\/USD 1-week chart. Source: Rekt Capital<\/em><\/figcaption><\/figure>\n

Rekt Capital said:<\/p>\n

\u201cHistorically, #BTC tends to bottom at or below the 200-MA (orange). The 200-MA thus tends to offer opportunities with outsized ROI for $BTC investors (green). […] Should BTC indeed reach the 200-MA support… It would be wise to pay attention .\u201d<\/p><\/blockquote>\n

The overall cryptocurrency market capitalization now stands at $1.258 trillion, and Bitcoin\u2019s dominance rate is 44.5%.<\/p>\n

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.\n<\/p>\n<\/div>\n