Jerome Powell's Coming Inflation Speech May Weigh on Dollar and Boost Bitcoin: Analysts

The Federal Reserve chief is expected to bolster expectations of inflation in a keynote address Thursday. That may be bad for the U.S. dollar but good for bitcoin.

AccessTimeIconAug 25, 2020 at 12:00 p.m. UTC
Updated Sep 14, 2021 at 9:47 a.m. UTC

U.S. Federal Reserve Chair Jerome Powell is expected to bolster expectations of inflation during his keynote speech at the Jackson Hole Economic Policy Symposium on Thursday.

According to analysts speaking to CoinDesk, that could ultimately lead to further drops in the dollar and greater buying power for bitcoin traders and investors.

  • The Fed chief is expected to signal tolerance for higher inflation during the speech, with the central bank having mostly missed its 2% inflation target since 2012.
  • “Powell has previously stated that he doesn't think inflation is a significant risk and is prepared to see it overshoot to meet his objectives,” Charlie Morris, chief investment officer at ByteTree Asset Management, told CoinDesk over WhatsApp.
  • A more relaxed approach to managing price pressures could power a stronger rise in long-term inflation in the U.S.
  • “The major impact for crypto out of this symposium would be a change in monetary policy and further depreciation of the U.S. dollar, which could propel bitcoin higher,” said Matthew Dibb, co-founder of Stack.
  • Inflation is expected by many in the cryptocurrency space to be a driving factor for bitcoin gains, as it's perceived to be a hedge asset similar to gold.
  • The symposium, attended by central bankers, Federal Reserve members, economists, financial organizations and academics, among others, will be held virtually this year.

Inflated expectations

Bitcoin against 10-year breakeven inflation rate
Bitcoin against 10-year breakeven inflation rate
  • The 10-year breakeven rate, which gauges the market's expectations of inflation, has risen to pre-coronavirus levels above 1.6% from a low of 0.5% observed during the March markets crash.
  • Bitcoin has largely tracked the metric higher over the past five months, while the dollar index has declined by nearly 10%.
  • The cryptocurrency has witnessed greater year-to-date gains in U.S.-dollar terms compared to those seen against other currencies such as the euro and Japanese yen:
Bitcoin year-to-date gains in major currencies
Bitcoin year-to-date gains in major currencies
  • The data suggests bitcoin's recent rally has been to some extent fueled by the diminishing value of the dollar.
  • While the rally appears to be on pause right now, bitcoin looks well positioned to benefit from a resurgence in inflation and further devaluation of the dollar over the long term.
  • At press time, bitcoin is trading near $11,550, representing a 1.8% drop on the day, according to CoinDesk’s Bitcoin Price Index.
  • Multiple rejections above $12,000 seen over the past three weeks have put brakes on the rally from July lows below $9,000.
  • A deeper pullback may be seen if the immediate support at $11,000 is breached, according to analysts at Stack, a provider of cryptocurrency trackers and index futures.


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