The largest cryptocurrency, Bitcoin, is stuck in the $19k-$20k range. The macroeconomic market is dictating the value of Bitcoin. Unfavorable market sentiment is making the Bitcoin price movement sluggish.
The Federal Reserve is continuing its hawkish stance to curb inflation levels in the country. However, risks to global financial stability are challenging the Fed’s resolve. Now, former treasury secretary Lawrence Summers wants the Fed not to budge on its hawkish monetary policy.
Bitcoin prices fell by 2.42% in the last 24 hours and are currently trading at $19,490.
Why Bitcoin Value May Drop
Bitcoin is strongly correlated with the broader general market. As the Federal Reserve ramps up its monetary tightening, S&P 500 and NASDAQ-100 become more volatile. Consequently, Bitcoin, which is doubly correlated to the general market, is seeing a massive selloff.
Market participants are quickly turning against the Federal Reserve. Many Wall Street Banks are stating that inflation levels have already peaked in the country. Therefore, the central bank’s aggressive tightening is unnecessary. Experts are also blaming the Fed for a potential recession.
The United Nations has asked central banks across the world to pivot from their aggressive monetary restricting. Similarly, the World Bank is stating that the global economy will face a major recession in 2023.
However, key Fed officials appear resolute in their hawkish stance. Neel Kashkari, the President of the Minnesota Fed, stated that he sees no evidence of peaking inflation. The unemployment data from the US Labor Department will also bolster the Fed’s stance. It will result in a further drop in Bitcoin value.
Now, the Fed is receiving much-needed support from the former treasury secretary. He believes that the Fed needs to deliver on its promises to avoid inflation from entrenching into normalcy.
What Are Summer’s Plans For A Recession
Similar to the Fed, Summers wants the Fed to prioritize inflation over financial stability. According to him, the Fed can tackle a recession after it successfully curbs inflation.
However, the Fed still needs to reveal how it plans to tackle stagflation.