What happened
Over the last 24 hours, the price of Bitcoin (BTC 2.15%), the world's largest cryptocurrency, fell roughly 4.5% as of 2:02 p.m. ET after comments made yesterday by Federal Reserve Chairman Jerome Powell seemed to put the broader market on edge. The price of Bitcoin hovered around $39,335 as of this writing.
So what
The markets are currently trying to gauge whether the Fed's planned hikes to its benchmark overnight lending rate, the federal funds rate, and the planned reduction of its balance sheet later this year will tip the economy into a recession.
Image source: Getty Images.
Yesterday, Powell emphasized that the Fed needs to move quickly to rein in surging inflation. Powell also said that the chance of a half-point rate hike, which is more aggressive than usual, "will be on the table for the May meeting." Following these statements, the market's expectations for a half-point hike rose.
Many believe that Bitcoin could be a hedge for inflation, but so far the cryptocurrency has struggled similarly to tech stocks and has seen its price come down over the last six months.
Now what
As it has in the past, the price of Bitcoin is being impacted by the Fed's actions. Even if Bitcoin was a proven hedge for inflation, it still might be struggling because of the intensity of current inflation. When inflation rises too quickly, even stocks that are known for hedging inflation can struggle.
Still, as cryptocurrencies grow in popularity every day and get more integrated into the traditional financial system, I believe Bitcoin is a good long-term hold.
