Bitcoin Falls Below $20,000 — and Wall Street Loses $1.25 TRILLION — as Fed Warns of More Rate Hikes

Bitcoin fell sharply on Friday after the Federal Reserve chairman warned further interest rates lie ahead as the central bank battles to tackle inflation.

In a hotly anticipated speech at Jackson Hole in Wyoming, Jerome Powell vowed that the Fed will "use our tools forcefully" to address the cost-of-living crisis — and he admitted the rate rises could cause "some pain" to the U.S. economy.

Warning that it would be unwise to take its foot off the brakes too early, he added:

"Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy."

The Fed increased its base rate by three-quarters of a percentage point — 75 basis points — for the second time in a row in July, and Powell reaffirmed that "another unusually large increase could be appropriate at our next meeting."

All of this will be guided by the data — and while the target for inflation stands at 2%, the most recent Consumer Price Index reading came in at 8.5%. While this is an improvement on the month before, it remains near 40-year highs.

There are fears that hiking interest rates so aggressively could slow economic growth to the point where the U.S. tips into a recession.

Selloffs Galore

The stock markets reacted negatively to the speech — and $1.25 trillion was wiped off Wall Street in a single day on Friday… more than the total market cap of all cryptocurrencies.

There was also a sea of red across global markets on Monday as traders continued to digest the news.

Cryptocurrencies have been closely correlated to stocks of late — and suffered sharp selloffs because of their status as a risk-on asset.

Bitcoin, which had been nearing $22,000 on Friday, fell sharply in the hour after Powell's speech — and over the weekend, tumbled to lows of $19,600.79.