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The bitcoin price has swung between highs of $65,000 and lows of almost $50,000 over the last month, with the world’s largest asset manager BlackRock issuing a serious volatility warning.
Now, as Tesla billionaire Elon Musk stokes fears of a U.S. dollar “total collapse,” the chief executive of Wall Street giant JPMorgan, Jamie Dimon, has warned the Federal Reserve and the U.S. dollar isn’t “out of the woods” yet.
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Jamie Dimon, the chief executive of Wall Street giant JPMorgan, fears stagflation could hit the … [+]
“I would say the worst outcome is stagflation—recession, higher inflation … I wouldn’t take it off the table,” Dimon said at a fall conference from the Council of Institutional Investors in, New York in comments reported by CNBC.
Stagflation is a name given by economists to an economy that’s hit by both prices spiraling higher and low growth, and is generally believed to be a difficult economic situation to recover from.
According to Dimon, inflationary forces such as higher deficits that add to the spiraling U.S. debt of $35 trillion and increased infrastructure spending will pile pressure on the U.S. economy.
“They’re all inflationary, basically in the short run, the next couple of years,” Dimon said. “So, it’s hard to look at [it] and say, ‘Well, no, we’re out of the woods.’ I don’t think so.”
Dimon’s inflation warning comes after Elon Musk shared a $36 trillion “by the end of 2024” warning over the spiraling interest payments on the huge U.S. national debt pile.
The bitcoin price has swung wildly over the last month as the market braces for the Federal Reserve to cut interest rates for the first time in the post-pandemic era, with traders overwhelmingly betting on either a 25 basis point or 50 basis point interest rate cut.
“The key focus for investors this week is the scale of any interest rate cuts by the Federal Reserve,” Russ Mould, investment director at brokerage AJ Bell, said in emailed comments.
“A quarter percentage point would be seen as the Fed starting a ‘softly, slowly’ path to easing monetary policy in light of concerns about a weaker jobs market. However, traders are increasingly focused on a bigger cut, with a 59% probability of a half-percentage point reduction at the meeting.”
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The bitcoin price has fallen back from its recent peak of over $70,000 per bitcoin, fueling fears a … [+]
The Fed is widely expected to cut interest rates when officials gather for the two-day policy meeting on September 17, potentially signalling a new cycle of cheaper borrowing and fresh liquidity.
However, weaker than expected U.S. job data triggered a bitcoin price crash earlier this month, with the slowing jobs market fueling fears the Federal Reserve has waited too long to cut interest rates and could have tipped the economy into recession.
“There have been suggestions that the Fed has been too slow to act, but it treads a fine line with regards to playing catch-up and going in too hard with rate cuts,” Mould added.
“A half-percentage point cut would show it is serious about making things easier for consumers and businesses, in the hope they spend more money. However, some investors might take such a move to be a signal that the Fed is really worried about the state of the economy. Therefore, it’s hard to predict with confidence how the market will react if the Fed does push through a half-percentage point cut.”
Traders are expecting this week’s Fed meeting to kick off a series of interest rate cuts, with investors betting on reductions through until the end of the year.
“The first Fed rate cut still may not be the deepest, but the central bank is likely to signal a quick desire to head to a neutral policy setting, which therefore could include a 50 basis point rate cut before the year’s end,” analysts with venture capital company Tagus Capital wrote in emailed comments, adding previous Fed interest rate cuts have been bullish indicators for the bitcoin price and wider crypto market.
“Overall, this is likely to lead to a recovery in U.S. dollar liquidity and historically digital asset cycles closely follow such liquidity cycles.”