Bitcoin Rally Short-Circuited as Fed Chair Powell Raises Stagflation Fear
Bitcoin's ascent hit a snag recently as Federal Reserve Chair Jerome Powell voiced concerns about the potential for stagflation due to President Trump's tariffs. Powell highlighted the substantial impact of the tariff hikes on inflation and economic growth, leading to parallels with the challenging economic landscape of the 1970s.
This warning caused both Bitcoin and stock markets to slide, reversing an earlier upward trend for the cryptocurrency. The sudden reversal occurred during U.S. trading hours as investors absorbed Powell's stark commentary on how the tariffs could strain achieving the Fed's dual-mandate goals.
Stocks in the U.S. were not immune to this fallout either, with the Nasdaq plummeting by 3.4% from its session high as market participants grappled with Powell's cautionary statements.
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Bitcoin Rally Short-Circuited as Fed Chair Powell Raises Stagflation Fear
"We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension," said Powell of the effect of the Trump tariffs.
- Fed Chair Jerome Powell raised stark concerns over the effects of President Trump's tariffs policy.
- Bitcoin and stocks both tumbled on Powell warning.
A modest bitcoin rally to a possible challenge of the $86,000 level quickly reversed during U.S. afternoon trading hours on Wednesday as Federal Reserve Chairman Jerome Powell warned on the effects of President Trump's tariff regime.
"The level of the tariff increases announced so far is significantly larger than anticipated," said Powell in a speech. "The same is likely to be true of the economic effects, which will include higher inflation and slower growth."
In other words, stagflation — a throwback to a sizable portion of the 1970s when the U.S. experienced weak economic activity alongside double-digit inflation.
"We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension," continued Powell.
U.S. stocks, which had been trying to mount a comeback from opening declines, also were hit, the Nasdaq slumping 3.4% to a session low.
