Bitcoin has crashed below $20,000 and is still almost 60% below its high for the year.
The world’s largest and best-known cryptocurrency fell 1.5% yesterday to $19,946, down $298 from its previous close, Reuters reports. Meanwhile, Ether, the currency linked to the Ethereum blockchain network, fell 2.76% to $1,467.2, losing $41.60 from its previous close. Bitcoin was last below $20,000 in mid-July.
Bitcoin’s decline comes after Federal Reserve (Fed) Chairman Jerome Powell said Friday that the U.S. economy will need monetary tightening “for a while” before inflation is under control, a fact that could mean slower growth, a weaker labor market and “some problems” for households and businesses.
“To contain inflation will likely require a longer period of lower-than-usual growth,” he said. There will also likely be a weakening labor market. Higher interest rates, slower growth, and a weaker labor market will lower inflation but will also cause pain for households and businesses,” Powell said in a speech prepared for the bankers’ meeting in Jackson Hole, Wyoming, USA.
He added, “Unfortunately, that is the cost of fighting inflation. But failing to restore price stability would mean more suffering.” Some investors believe the Fed will stop raising rates if the unemployment rate rises too quickly, and some even estimate there could be a rate cut next year.
Some officials have indicated that even in the event of a recession, they will not refrain from raising rates if rates do not move convincingly toward the Fed’s 2% target. Powell gave no indication of the level of rate hikes before the Fed ends this type of monetary policy.