Fed Chairman Jerome Powell’s comments on crypto cause panic, sending Bitcoin price into risky territory

• Bitcoin price is currently consolidating just below the February 21 high of $58,367.
• Fed Chairman Powell says crypto assets are not useful as a store of value.
• Powell’s comments were not well received by market participants and now BTC could be at risk of a steep correction.

Bitcoin could be bound for significant losses in response to Federal  Reserve Chairman Powell’s negative comments on cryptocurrencies and whether the time was right for CBDCs.  

Powell’s comments reignite debate on cryptocurrencies

Speaking today at the Bank for International Settlements conference, Federal Reserve Chairman Jerome Powell was adamant that there was no rush for the central bank to introduce a CBDC and questioned the legality of such digital assets.  

Powell was very direct with his comments on what he called crypoassets.

They’re more of an asset for speculation, so they’re not particularly in use as a means of payment. It’s more a speculative asset. It’s essentially a substitute for gold rather than for the dollar.

His bearish insights come a few weeks after Janet Yellen expressed her concerns about cryptocurrencies.

A key point in Powell’s comments on a CBDC was that the Federal Reserve would need “buy-in from Congress, administration, and the broad public support.”  

The central bank would not move forward without authorization from congress. He went on to say that the ongoing collaboration with the Massachusetts Institute of Technology’s digital currency initiative is not to develop a prototype CBDC but a study of the limits of the technologies and the costs and benefits.

Bitcoin price shows indecision within the trader ranks    

After falling below the lower trendline of an ascending channel, Bitcoin has been trading around the February 21 high at $58,367. The volume profile has compressed, and the RSI has moved closer to the 50 level, showing growing indecision within the market participants.

In the 4-hour chart below, BTC price could be completing a rounding formation just above the 100 four-hour simple moving average (SMA). A failure to hold leaves the flagship cryptocurrency open to a range of bearish outcomes.

The first significant support is the head-and-shoulders bottom’s neckline at $53,350, followed by the .50 retracement level at $52,397. If selling pressure accelerates, the next support is not until the February 28 low at $43,106.

BTC/USD 4-hour chart

A reversal to the upside needs a daily close above the all-time high at $61,788.45, which may release a quick rise to the 1.618 Fibonacci retracement level at $67,850.