For better or worse, cryptocurrency investors have become Federal Reserve watchers. This is a phenomenon that arguably dates back to early 2020, when big institutional investors started moving into crypto. But this summer has been peak season for crypto Fed watchers. The Fed hiked interest rates by 75 basis points June, and then by another 75 basis points in July in an attempt to slow inflation. On both occasions, there was much hand-wringing over the future of Bitcoin (CRYPTO: BTC). Then came the big Jackson Hole, Wyoming, speech by Fed Chairman Jerome Powell on Aug. 26.

Suddenly, it seems like the entire Bitcoin narrative is being driven by the Fed. Crypto news sites are now filled with stories about the Federal Reserve and monetary policy. This connection has enormous implications for the future price of Bitcoin.

Most importantly, it could mean that the price of Bitcoin likely will not start to move higher until the Fed has finished its monetary tightening. This is a dramatic change in outlook. After all, it was only six months ago that some crypto investors were saying that Bitcoin was completely uncorrelated with the broader equity market. That was what made Bitcoin so attractive for many: By buying Bitcoin, you were getting access to an asset that could keep heading higher, regardless of the economic cycle. You didn't have to know anything about economics to know that Bitcoin was headed to the moon.

Continue reading

Source Fool.com