Bitcoin is again soaring, climbing to nearly $10,000 per bitcoin after U.S. Federal Reserve chair Jerome Powell warned the U.S. is facing an “extended period” of weak economic growth “without modern precedent.”
The bitcoin price began climbing following Powell’s comments yesterday but has now accelerated its rally, up almost 10% over the last 24 hours.
The latest bitcoin rally comes after bitcoin went through a supply squeeze known as a halving earlier this week—cutting the supply of new bitcoin rewarded to those that maintain the bitcoin network, called miners, by half.
“Yesterday, Powell warned about the economic risks from COVID-19 and increased tensions with China, which could lead to liquidity issues,” Marcus Swanepoel, the chief executive of London-based bitcoin and cryptocurrency exchange, said in a note.
“In response, global markets fell quickly and cryptocurrencies found buyers.”
The bitcoin price hit $9,950 on the Luxembourg-based Bitstamp exchange before falling back slightly. Other major cryptocurrencies have also climbed, adding some $20 billion to the total value of the crypto market.
“If bitcoin can go above the big, round level $10,000, it will give hope to the whole crypto market,” said Alex Kuptsikevich, senior financial analyst at FxPro, adding bitcoin is currently “defying gravity.”
Meanwhile, the S&P 500 index closed down 1.75% after Powell’s comments as investors digested the likelihood of a sluggish recovery from the coronavirus pandemic.
“Wall Street did not seem happy about the Fed’s statement. Not the warnings and not the unwillingness to provide an easy way out,” Mati Greenspan, the founder of analysis and advisory firm Quantum Economics, said in a note.
“Stock indices are down more than 1%. On the other hand, bitcoin and the digital markets are up. Quite a welcome contrast to the tight correlation we’ve experienced since the start of the corona-crisis. In fact, the entire halvening event seems to have had a rather liberating affect on the digital asset space.”
Last month, Fed officials slashed interest rates to zero, launched an unprecedented bond buying program and teamed up with the Treasury Department to begin precedent-setting emergency lending to companies and first-ever corporate bond purchases.
But Powell said the Fed might need to go further.
“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks,” Powell said in an interview with Adam Posen, the director of the Peterson Institute for International Economics.
“There is a sense, growing sense I think, that the recovery may come more slowly than we would like. But it will come, and that may mean that it’s necessary for us to do more.”
Meanwhile, bitcoin and crypto analysts are still processing the effect of bitcoin’s third supply halving, which has put pressure on bitcoin miners.
“It is highly probable that some of the miners will start selling their assets to cover the losses,” said Kuptsikevich.
“Others will go out of business, and if they have debts, they will also have to cover their costs by selling coins.”
The bitcoin price has more than doubled since the coronavirus-induced crash in March—putting it on track to be one of the year’s best performing assets.
However, many have warned bitcoin volatility is likely to increase over coming weeks and months before settling down due to the halving supply shock.
The bitcoin price crashed over 10% on Sunday ahead of bitcoin’s third halving, spooking many bitcoin traders and investors.