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Bitcoin (BTC) nudged $27,000 after the May 19 Wall Street open as the Chair of the United States Federal Reserve delivered comments on policy.

BTC price volatility returns as Powell speaks

Data from Cointelegraph Markets Pro and TradingView followed BTC/USD as it attempted to reclaim the focal level in its short-term trading range.

All eyes were on Fed Chair Jerome Powell on the day, who was speaking at the Thomas Laubach Research Conference in Washington, D.C.

Market nerves had returned the day prior as other Fed officials, along with jobless data, had heightened expectations of interest rate hikes continuing.

“While the financial stability tools helped to calm conditions in the banking sector, developments there, on the other hand, are contributing to tighter credit conditions and are likely to weigh on economic growth, hiring and inflation,” he said.

Bitcoin (BTC) stares at potential losses heading into the third-quarter of 2023 after U.S. lawmakers will likely reach an agreement on raising the debt ceiling.

A $1 trillion liquidity hole ahead

Raising the debt ceiling means the U.S. Treasury could issue new bonds to raise cash to meet its previous obligations.

As a result, the cash pile at the Treasury General Account could increase from $95 billion in May to $550 billion by June and to $600 billion in the three months afterward, according to the department's recent estimates.

Ari Bergmann, the founder of risk management firm Penso Advisors, estimates that the Treasury will cross $1 trillion by the end of Q3, 2023. 

“My bigger concern is that when the debt-limit gets resolved — and I think it will — you are going to have a very, very deep and sudden drain of liquidity,” said Bergmann, adding:

It is an empirical fact that the United States dollar is continuing to lose its dominant role as the global reserve currency, but what might happen to the stablecoin market should it be superseded?

According to data from the International Monetary Fund, the U.S. dollar now accounts for just over 58% of global foreign exchange reserves, a considerable decrease from the 71% share it had in 2001.

Jeremy Allaire — the CEO of USD Coin (USDC) issuer Circle — highlighted this shift at the April 26 Consensus 2023 conference, arguing that the U.S. must implement stablecoin legislation and digitize the U.S. dollar to remain competitive amid the “very active de-dollarization taking place.”

De-dollarization refers to the process of reducing the use of the U.S. dollar in a country’s economy, and powerhouses like Russia and China are actively pursuing de-dollarization as they look to replace the U.S. dollar with digital assets, other fiat currencies, and potentially a BRICS currency between Brazil, Russia, India, China and South Africa.

As an example of this de-dollarization taking place, the Chinese yuan has recently overtaken the U.S. dollar as China’s most used cross-border currency according to Bloomberg, increasing to a high of 48% of transactions after it made up nearly 0% in 2010.

Bitcoin (BTC) traded back below $27,000 on May 19 as analysis flagged large-volume trades pressuring price.

Inflation specter haunts crypto markets

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD hitting lows of $26,380 on Bitstamp.

A modest recovery then took the pair to a range familiar from several days prior, this still in focus prior to the week’s final Wall Street open.

Downside overnight came courtesy of increasing market expectations of an interest rate hike by the United States Federal Reserve in June.

These came thanks to low jobless claims data for the week, with Fed officials adding a hawkish tone.