Fed Chair Powell warns that road to getting inflation back down is bumpy – Time to buy Bitcoin as a hedge?

• Jerome Powell has said that Fed could turn aggressive with interest rate hikes amid strong inflationary pressure.
• Bitcoin saw some selling pressure on Tuesday, but some analysts think it to be a value buy now, to outgrow inflation in the long term.

On Tuesday, March 7, during a Senate Committee hearing Federal Reserve Chairman Jerome Powell said that they are planning to raise interest rates warning of a tighter monetary policy going ahead. The January inflation data shows that inflation has reversed from the decelerating trend in late 2022.

Not only did Powell warn of higher rate hikes, but he also spoke about faster rate hikes. In his remarks before the Senate Committee, Powell said:

The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.

Wall Street immediately reacted to Powell’s comments on Tuesday as the Nasdaq Composite (INDEXNASDAQ: .IXIC) tanked by 1.25%. A tighter monetary policy means a lack of liquidity in the market and it will directly impact risk-on assets such as equities and crypto.

Jerome Powell’s recent comments suggest that the terminal rate of interest rate hikes could jump to the range of 5.5%-5.75% from the previous 5.1%.

Will Bitcoin and Crypto Act As a Hedge

Fundamentally, Bitcoin and the rest of the cryptocurrencies have been created to serve as a hedge against traditional fiat currencies. However, since its inception, Bitcoin has served as an extremely volatile asset class and has been functioning more as a risk-ON asset instead of a hedge.

Considering historical trends and the crash of 2020, Bitcoin too collapsed along with the broader equity market. Now that market analysts are predicting a recession going ahead, there’s every possibility that Bitcoin and crypto could face the jolts of it.

Over the last 24 hours, the BTC price has dropped by 1.63% and is currently trading at $22,059 and a market cap of $425 billion. While many were expecting the Fed to slow down on lower inflationary data, things have actually turned out to be the opposite. Popular crypto analyst Michael Van De Poppe states that on the downside $21,500 remains a crucial support. Losing this could push the BTC price further down to $19,500.

However, several market analysts believe that even though Bitcoin could be volatile in the near term, it will surely emerge as a strong asset class going ahead. Furthermore, as the trust in fiat currencies reduces, any dip in the Bitcoin price could prove as a buying opportunity. for someone looking at a long-term horizon of five years, Bitcoin could still be a valuable deal at the current price levels. Billionaire investor Tim Draper is 100% sure that the Bitcoin price will touch $250,000 by the end of 2024.