Bitcoin traded back above US$23,000 on Wednesday morning in Asia after U.S. Federal Reserve Chairman Jerome Powell overnight said the “disinflationary process” has started in the economy. The comments helped push U.S. equity markets higher as well as Ether and other top 10 non-stablecoin cryptocurrencies. Powell said further interest rate rises may be necessary, but the markets read his comments as indicating the surge in rates last year won’t repeat in 2023. Polkadot had the biggest jump, closely followed by Polygon.

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Fast facts

  • Bitcoin rose 2.2% to US$23,259 in the 24 hours to 8 a.m. in Hong Kong, bringing its gains over the last seven days to 0.5%. Ether rose 3.4% to US$1,671 and is up 5.4% for the same week period, according to data from CoinMarketCap.
  • Polkadot rose 6.8% to US$6.94 for a weekly gain of 10.8%. Polygon rose 6.6% to US$1.27, adding 14.2% for the week.
  • The Shiba Inu memecoin rose a less robust 1.9% to trade at US$0.00001439, but the Dogecoin copy-cat token has had a strong week and is up 21.78% over the past seven days.
  • The crypto market capitalization rose 1.8% to US$1.08 trillion, with total trading volume rising 25.4% to US$60.2 billion.
  • U.S. equities finished higher on Tuesday. The S&P 500 Index gained 1.3%, the Nasdaq Composite Index rose 1.9%, and the Dow Jones Industrial Average closed up 0.8%, breaking a two-day losing streak.
  • It was a volatile day of trading though markets finished near session highs following Powell’s comments on inflation and interest rates during an interview at the Economic Club of Washington.
  • “The disinflationary process, the process of getting inflation down, has begun and it’s begun in the goods sector, which is about a quarter of our economy,” said Powell. “But it has a long way to go. These are the very early stages.”
  • Powell made similar comments on inflation last Wednesday when he announced the Fed was raising interest rates by 25 basis-points. Since then, however, surprisingly strong jobs figures released last Friday caused some investors to second guess this assessment, rocking crypto and equity markets in the past few days.
  • The U.S. Bureau of Labor Statistics data on Friday revealed that nonfarm payroll jobs in January jumped 517,000, much higher than the expected 185,000 and about double the 260,000 recorded in December.
  • Powell said the central bank will continue to monitor economic data and warned that interest rates may still need to be raised higher than what markets have priced in.
  • Analysts at the CME Group predict a more than 90% chance that the Fed will raise interest rates by a further 25 basis points at its next meeting in March. U.S. interest rates are currently at 4.5% to 4.75%, the highest in 15 years, and Fed officials have repeatedly indicated they could raise rates to as high as 5%.
  • U.S. President Joe Biden will deliver his annual State of the Union address at 9 p.m. Eastern Time on Tuesday, where he is expected to announce several new policy proposals, including quadrupling the tax on stock buybacks, imposing a billionaire minimum tax, and expanding housing aid for low-income veterans.
  • With the U.S. House of Representatives under the control of the Republican party following November’s mid-term elections, it will prove difficult for the Democratic President to achieve these policy goals.

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