What Caused the Decline of Bitcoin (BTC) Prices on Wednesday Afternoon?

A modest bitcoin rally toward the $86,000 mark quickly reversed during U.S. afternoon trading on Wednesday, prompted by Federal Reserve Chairman Jerome Powell’s comments regarding the ramifications of President Trump’s tariff policies. “The level of the tariff increases announced so far is significantly larger than anticipated,” Powell stated in his speech. “We can expect similar results in the economic impacts, which are likely to include higher inflation and slower growth.” This scenario resembles stagflation, reminiscent of a significant period in the 1970s when the U.S. faced sluggish economic activity alongside double-digit inflation. “We may find ourselves in the challenging situation where our dual-mandate goals are at odds,” Powell continued.

Following Powell’s remarks, bitcoin (BTC) experienced a decline of about 2.5%, now trading at $83,700—a drop of 1.5% over the past 24 hours. U.S. stocks, which had attempted to recover from early losses, were also affected; the Nasdaq fell by 3.4% to reach a session low.

Powell emphasized the need for a regulatory framework for stablecoins as cryptocurrency becomes more mainstream, suggesting that banking regulations surrounding crypto could be “partially relaxed.” In March, the U.S. Senate Banking Committee progressed a bill to regulate stablecoin issuers, marking a significant step closer to legislation in the U.S.

Regarding the Fed’s stance on crypto and BTC, Quinn Thompson, chief investment officer of hedge fund Lekker Capital, commented, “Powell came out extremely hawkish.” He noted that Powell characterized last week’s market fluctuations as “orderly market functioning,” which Thompson found surprising. “I would have at least expected him to acknowledge the heightened volatility and disruptions occurring in the treasury market, but he did not,” he added.

Thompson indicated that Powell’s tone suggests investors should lower their expectations for any imminent rate cuts, a situation that could negatively impact risk assets, including cryptocurrencies. “It seems a May rate cut is off the table unless prompted by adverse developments, and I wouldn’t say a June cut is guaranteed either,” Thompson concluded. “The optimistic outlook for crypto, and specifically bitcoin, hinges on liquidity and intervention from policymakers—both of which seem distant, making it challenging to adopt a positive perspective in the short term.”

UPDATE (April 16, 18:40 UTC): Includes additional comments made by Chair Powell regarding stablecoins and an analyst’s insights.