According to CoinGecko, the world’s largest digital asset by market capitalization, Bitcoin, has seen little change in the past 24 hours, trading around $26,100 USD. The recent hawkish tone from the Federal Reserve, rising bond yields, and uncertainties in China are driving a risk-taking sentiment.
Gordon Grant, the head of trading at Genesis, stated, “Tighter monetary policies may be linked to reduced liquidity, greater demand for the US dollar, and the potential for asset prices to decline, especially for assets considered alternatives to the dollar.”
Fed’s Hawkish Tone at Jackson Hole At the Jackson Hole Symposium, Federal Reserve Chair Jerome Powell reaffirmed the central bank’s commitment to tightening monetary policy until the 2% inflation target is achieved. The yield on US Treasury bonds increased after Powell’s speech.
Khaleelullah Baig, CEO of Koinbasket, noted, “The recent uptick in bond yields may temporarily lead to a drop in Bitcoin’s price, as both individual and institutional BTC speculators seek to capitalize on this short-term downturn.”
This perspective is echoed by Jeff Feng, co-founder of Sei Labs, who stated that the Fed’s hawkish stance and the subsequent rise in bond yields indicate a shift in investor sentiment towards the relative stability of bonds.
He said, “In an economic context marked by volatility and uncertainty, the promised stability of bonds may be attractive, potentially diverting attention from high-risk assets like Bitcoin.”
However, Grant emphasized that long-term drivers could decrease the demand for the US dollar, such as “a serious debate about diversifying away from the dollar by major economies.” He highlighted recent downgrades by Fitch to the US Treasury and credit rating cuts by Moody’s for some US regional banks.
He added, “If the financial health indicators of the US worsen, the future for Bitcoin might not be as bleak.”
China’s Threat Grant pointed out the economic contagion spreading from China as the significance of digital assets continues to grow. He emphasized that China’s overseas asset debts are of a scale comparable to Ethereum’s market capitalization.
“When we talk about market scale, it’s a clear reminder that in the traditional ‘paper’ money world, some real estate investors have borrowed more than the entire value of the second-largest blockchain in a matter of years. As attention turns to an economy in such turmoil, what will happen and where will people turn?” he questioned.
As of Monday (August 28th), shares of China Evergrande Group, the world’s most indebted real estate developer, have plummeted by 87%. Since defaulting in 2021, the investor has struggled to complete projects and repay suppliers and lenders. The Chinese government implemented restrictions on Monday to combat the crisis, including Beijing halving the stamp duty for stock trading to boost the struggling market.