Bitcoin was holding onto a critical support level above $10,700, as Jerome Powell went strict over the delay in the second coronavirus stimulus package.
The Federal Reserve Chairman said in his address to the National Association for Business Economics that providing a smaller fiscal aid would do more harm to the US economy than an excessive one. He stressed that the recovery from the damage caused by the coronavirus pandemic remains “far from complete.” But despite that, the “risks of policy intervention are still asymmetric.”
“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” Mr. Powell explained. “By contrast, the risks of overdoing it seems, for now, to be smaller. Even if policy actions ultimately prove to be greater than needed, they will not go to waste.”
Uncertainty
Mr. Powell’s comments came as the Democratic House Speaker Nanci Pelosi and the US Treasury Secretary Steven Mnuchin struggled to finalize a new stimulus. The Republican-led White House offered a $1.6 trillion aid, but the Democrats demanded at least $2 trillion.
The uncertainty decreased investors’ risk appetite that prompted them to move into the dollar and dollar-based instruments. As a result, stock, gold, and Bitcoin suffered considerable losses – all in tandem.
Meanwhile, on the days the US dollar plunged lower, the said three risky markets surged higher. It is because of a prevailing narrative that equates stimulus aid with a potential depreciation in the greenback. It terms the paper money’s unlimited supply as an attack on the savers.
Meanwhile, it pits Bitcoin and Gold as an alternative store of value because of their scarcity.
Stimulus packages and bail outs are a tipping point for the acceptance of digital assets and Bitcoin.
— David Nage🎯 (@DavidNage) October 5, 2020
On Tuesday, Mr. Powell’s comments on the stimulus aid pushed the US dollar higher and Bitcoin lower. That showed that investors are still anticipating a delay in the package. Meanwhile, the cryptocurrency’s ability to hold $10,700 as support revealed traders’ hopes for a stimulus in the next few weeks.
Bitcoin Market Outlook
Analysts remain divided on Bitcoin’s next direction. Pseudonymous daytrader TraderKoz expressed his bearish bias despite showing the price in a directional conflict.
Crypto Mikey stated the same in a tweet published earlier Tuesday. He, nevertheless, noted that Bitcoin would drop because of its positive correlation with the Philadelphia Gold and Silver Index (XAU). The latter plunged lower lately.
“With XAU selling off, I refuse to be a BTC bull at these levels,” the analyst wrote. “Sorry, there’s under a 25 percent chance given macro market price action in cryptos. Alt fleeting propping price up.”