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Bitcoin dumped strongly to the $40,000 region, because of the Fed president or pressure from the EU?

The latest statements of the Fed president and notable points

After a series of gloomy days with continuous dump moves, yesterday Bitcoin quickly climbed to the $42,000 price area with the expectation of continuing to increase in the near future. However, not long after the increase, today (April 22) the “big brother” of the crypto market is in the red again, “turning around” to the $40,000 area.

This volatility is widely attributed to the impact of the Fed chair’s recent statement on the issue of raising interest rates in the United States. At the time of writing, Bitcoin is trading at $40,600, down 2.8% over the past 24 hours.

At the time of writing, BTC price holds at $40,600. (Source: Tradingview)
At the time of writing, BTC price holds at $40,600. (Source: Tradingview)

Specifically, the Fed chair’s statement was given during a conference on the global economy presented by the International Monetary Fund (IMF).

On April 21, Jerome Powell said that raising the US benchmark interest rate by 50 basis points (0.5%) will become the main topic of discussion for the next meeting of the Committee. Federal Open Market (FOMC) next May.

That further confirms the more drastic moves of the US agencies in controlling inflation when the CPI has climbed to 8.5% – a record high number in the past 41 years. But the reality is that in recent years, the Fed seems to rarely raise interest rates by more than 25 basis points at a time.

Chairman Powell spoke during a panel presented by the International Monetary Fund (IMF) along with European Central Bank President Christine Lagarde and other representatives from the IMF, Indonesia and Barbados. He emphasized that:

I think a rate hike to 50 basis points will come out at the next meeting. It is absolutely necessary to restore price stability.”

During their meeting in March, members of the FOMC also agreed on a 25 basis point increase (an increase of 0.25%) but at the time, the Fed chair confirmed a rate hike was possible. faster than expected.

We will proceed with rapid rate hikes to more neutral levels and then more rigorously apply the plan if that becomes appropriate in light of the decision being made.

In fact, many analysts have suggested that the cryptocurrency market is increasingly moving in correlation with the stock market. Specifically, the 90-day correlation between Bitcoin and the S&P 500 recorded in March has reached a 17-month high.

It cannot be denied that the financial markets including crypto and securities have been significantly affected by the macroeconomic context since the beginning of 2022 until now. That has also pushed investors to pay more and more attention to these indexes.

The crypto market continues to record a dump of coins. (Source: quantcrypto.com)
The crypto market continues to record a dump of coins. (Source: quantcrypto.com)

Ahead of the Fed chair’s statements about the possible plan to raise interest rates to 0.5%, the crypto market seems to have reacted clearly when turning from yesterday’s green to red covering both Bitcoin and altcoins.

Meanwhile, the stock market was also red with a sharp drop of the S&P 500, NASDAQ,…

The US stock market also showed signs of red. (Source: CNBC)
The US stock market also showed signs of red. (Source: CNBC)

EU official proposes ban on Bitcoin trading and mining because of energy problems

Recently, officials in the European Union (EU) discussed banning Bitcoin transactions in a debate that proposed banning Proof of Work mining.

According to a report published by German digital culture organization Netzpolitik, EU officials have gone further in their decision to propose a complete ban on Bitcoin (BTC) trading in order to limit energy consumption quantity to a lower level.

Specifically during the EU meeting with the Swedish financial watchdog and the environmental protection agency, officials suggested that regulators could pressure the Bitcoin community to switch to a Proof mechanism. of Stake (PoS), instead of the current power consuming Proof of Work (PoW) mechanism.

Additionally, when discussing the potential impact of an outright Bitcoin ban on institutional and individual investors, officials were largely unconcerned and stated that all Bitcoin investors are fully aware of downside risk. They vehemently stated that:

Those who invest in BTC are fully aware of currency volatility or investment risks. We don’t need additional safeguards.”

The report on the officials’ meeting comes as the use of energy to mine Bitcoin continues to attract attention from environmental regulators and organizations. According to the Bitcoin Electricity Consumption Index from the University of Cambridge, Bitcoin mining currently consumes around 139 terawatt-hours (Twh) per year.

Meanwhile the whole UK uses an estimated 265 Twh in 2021, according to Statista figures.

UK electricity consumption index. (Source: Statista)
UK electricity consumption index. (Source: Statista)

At the end of March, Ripple co-founder Chris Larsen also joined hands with Greenpeace to pressure Bitcoin to change the consensus mechanism to PoS, just like Ethereum intends to do later this year.

Although the reports are detailed, the ban has officially been approved and when it will be applied is still a mystery, has not been specifically released by officials.