What happened
Since late afternoon yesterday, the price of the world's largest cryptocurrency, Bitcoin (CRYPTO:BTC), traded roughly 2.8% lower as of 3:47 p.m. ET today on what largely seems to be driven by macro concerns.
So what
Lawmakers are still working on passing a bill that would suspend the debt ceiling until 2025. The bill has been agreed upon and sent to the U.S. House of Representatives by President Biden and House Speaker Kevin McCarthy.
While most assets seem to have been impacted by the threat of default, Bitcoin seems to be coming under pressure today on concerns that the Federal Reserve will once again raise interest rates at its next meeting in a few weeks. Rising interest rates are one of the main reasons Bitcoin has seen its price fall so much since peaking in November 2021.
A few weeks ago, investors assumed the Fed would pause, but now the market is less confident. In an interview published today in the Financial Times, Loretta Mester, president of the Federal Reserve Bank of Cleveland, seemed to take a more hawkish view, saying: "I don't really see a compelling reason to pause. I would see more of a compelling case for bringing the rates up and then holding for a while until you get less uncertain about where the economy is going."
Now what
It's tough to know what the Fed will do at its June meeting. The agency clearly is divided on whether inflation has been tamed, although recent troubles with the banking system, which seem to be on investors' minds today, might be doing some of the Fed's work for it. Banks are slowing their lending, which in turn may have a chilling effect on the economy.
I think Friday's jobs report will be incredibly impactful on what the Fed does. A report that shows cracks in the labor market may allow the Fed to pause rate hikes.
Ultimately, I believe Bitcoin is one of the few cryptocurrencies worth having some exposure to and will be a good long-term investment.
