Powell's Tightening Statement Did Not Impact Bitcoin

In recent times, as uncertainties have increased for investors in the cryptocurrency market, Bitcoin prices continue to fluctuate around the $112,600 level. The statements made by Federal Reserve Chairman Jerome Powell regarding the potential end of the balance sheet reduction process (QT) did not change the overall market sentiment. Investors are concerned about the continuity of the downward trend in Bitcoin.

During his speech at the National Association for Business Economics conference in Philadelphia, Powell indicated that the balance sheet reduction process initiated in 2022 could be nearing its end. He emphasized that they plan to reach a point where 'reserves are slightly above what we consider sufficient' to halt the balance sheet reduction. The Fed has reduced its balance sheet from nearly $9 trillion, reached during the COVID-19 pandemic, to $6.6 trillion.

Powell's remarks have also brought along liquidity concerns following observed increases in short-term funding rates in the U.S. Additionally, it was noted that Congress's removal of the 'reserve interest' mechanism could threaten the Fed's control over short-term rates. However, despite all these developments, no significant impact has been seen on the Bitcoin market.

According to Deribit data, investors in the Bitcoin options market still prefer to take down (put) positions. This situation reveals that market participants have a pessimistic outlook for the future. Experts do not believe that the end of balance sheet reduction will initiate a new quantitative easing (QE) cycle. Indeed, the Fed significantly reduced the pace of balance sheet reduction over the past year.

Analysts emphasize that the balance sheet reduction had already slowed down while evaluating the current state of the market. A Markets and Mayhem analyst pointed out that the most important message from Powell's speech is the expectation of an end to QT and added that there hasn’t been a significant change in the current situation.

As a result, key points that investors should pay attention to include Bitcoin price movements, the Fed's future monetary policies, and market liquidity. In this period of uncertainty, careful analyses and monitoring strategies are critically important.