Bitcoin rebounded on Wednesday as Jerome Powell sent a mixed tone on the US economic recovery on first day of testimony before Congress.
The Federal Reserve Chairman told the House of Representatives Committee on Financial Services that the American economy is recovering. Nevertheless, he also cautioned about the resurgence of coronavirus infections and its negative impact on the economic rebound ahead.
“A full recovery is likely to come only when people are confident that it is safe to reengage in a broad range of activities,” Mr. Powell said in his opening statement. “The path forward will depend on keeping the virus under control, and on policy actions taken at all levels of government.”
Stimulus Mix-Up
The comments allowed investors to keep one leg in the cash and the other in riskier assets. The US dollar index jumped 0.45 percent on Tuesday. Simultaneously, gold inched lower by 0.44 percent while the US stocks and Bitcoin showed better intraday retracements.
Nevertheless, the downside pressure mounted on Bitcoin as Mr. Powell, in conjugation with US Treasury Secretary Steven Mnuchin, admitted that providing lending aid to thousands of small businesses affected by the coronavirus pandemic is beyond their authority.
They said the Federal bodies lacked the legal or logistical abilities to expand their emergency lending programs, adding that direct financial support from the US Congress may help the small businesses. The comments appeared as Congress struggles to finalize the second stimulus package because of a conflict between the Democrats and Republicans over the aid’s size.
Bitcoin bulls have hoped for an extended rally should the Congress pass another monetary help. They expect the aid to leave the US dollar under huge downside stress. And since the greenback has shown a concrete inverse correlation with Bitcoin, its weakness makes BTC/USD more bullish.
Nevertheless, with observers now expecting a delay over the next stimulus until the November’s presidential elections, it is likely for Bitcoin to remain under bearish pressure.