[Bitcoin Now] Fed Chair's 'Hawkish' Remarks and Mining Difficulty Drop Weigh on Prices

[Asia Economy Reporter Lee Jung-yoon] The price of Bitcoin, the representative cryptocurrency, is showing a downward trend following remarks by Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), indicating the possibility of an aggressive tightening stance.

According to the global cryptocurrency market tracking site CoinMarketCap, as of 11:39 a.m. on the 22nd, Bitcoin's price was $41,140 (approximately 50.26 million KRW), down 0.22% compared to the previous day.

Bitcoin prices have been declining due to Powell's hawkish comments at the National Association for Business Economics (NABE) conference on the 21st (local time). Powell stated, "We will take the necessary measures to stabilize inflation," adding, "If we conclude that it is appropriate to act more aggressively by raising the benchmark interest rate by more than 0.25 percentage points at the meeting, we will do so." He further explained, "We need to move quickly to return the monetary policy stance to a more neutral level and, if necessary, move to a more restrictive level to restore price stability." This suggested that an interest rate hike of up to 0.5 percentage points, rather than the usual 0.25 percentage points, could be possible. Earlier, the Fed raised the interest rate by 0.25 percentage points for the first time in 3 years and 3 months following the Federal Open Market Committee (FOMC) regular meeting on the 16th.

Concerns over interest rate hikes have previously caused Bitcoin prices to fall. Bitcoin, which was trading in the $42,000 range, dropped to the $38,000?$39,000 range amid rate hike concerns. However, after the rate hike, uncertainty diminished, and prices rose by more than 4%.

Additionally, the decline in Bitcoin mining difficulty appears to have had an impact. At the beginning of last month, Bitcoin's hash rate was 248 exahashes per second (EH/s), but on the 21st, it dropped to 208 EH/s. The hash rate represents the computational power of the network used for Bitcoin mining. A lower hash rate means mining difficulty has eased, making Bitcoin mining easier, which can lead to decreased demand and price drops.

However, there are also claims that Bitcoin prices could rebound soon. According to Bloomberg News, Bitcoin supply to personal wallets on cryptocurrency exchanges has hit a three-year low, and this supply reduction could lead to price increases. Stefan Ouellette, CEO of cryptocurrency platform FRNT Financial, said, "If there are many Bitcoins on exchanges, it means people are ready to sell," but "if there are no Bitcoins in personal wallets on exchanges, it means people are less prepared to sell."

Moreover, expectations are rising that the cryptocurrency market will expand as Goldman Sachs becomes the first major U.S. bank to engage in over-the-counter cryptocurrency options trading. Goldman Sachs has started Bitcoin cash-settled options trading in partnership with cryptocurrency financial services company Galaxy Digital. This form of trading settles the difference in cash at maturity without the actual exchange of Bitcoin.

Meanwhile, the digital asset Fear & Greed Index operated by Dunamu, the operator of the cryptocurrency exchange Upbit, recorded 52.99, indicating a 'neutral' stage. This is an increase of 2.31 compared to the previous day's 50.68 (neutral). Dunamu's digital asset Fear & Greed Index is divided into stages: 'Extreme Fear (0?20)', 'Fear (20?40)', 'Neutral (40?60)', 'Greed (60?80)', and 'Extreme Greed (80?100)'. A greed direction indicates increased interest in buying among market participants, whereas a fear direction indicates a fear of asset decline, leading to market exits and a chain reaction of price drops.