Crypto Turns Broadly Lower in U.S. Afternoon Trade as Stocks Give Away Gains

The rally seen in stocks and cryptocurrencies earlier Wednesday has reversed significantly.

While JPMorgan Chairman Jamie Dimon remains concerned about inflation, former FRBNY Chairman Bill Dudley said the economy is facing an imminent recession and the Fed needs to cut interest rates soon and often.

The price of Bitcoin ({{BTC}}) fell after rallying on Wednesday as U.S. stocks lost ground after a significant early rally amid afternoon activity in the United States.

Bitcoin {{BTC}} was trading at $54,800 at press time, down just under 4% from 24 hours ago and more than 6% from the $57,600 level touched a few hours ago. Ether {{ETH}} was worse off at $2,322, down 7.1% on the last day and pushing its odds against bitcoin to its lowest level in more than three years. The broader CoinDesk 20 Index was down 3%.

Trading started well on Wednesday after Bank of Japan Vice Governor Shinichi Uchida said the central bank would not raise borrowing costs when markets are volatile. Dovish comments sent the yen lower and sent Japanese stocks and U.S. index futures nicely higher. The uptrend faded for the day, though the Nikkei managed to close 1.2% higher and U.S. stocks opened with gains of around 1.5%.

With about ninety minutes left until the stock market close, the Nasdaq was down 0.8% and the S&P 500 was down 0.6%.

Speaking to CNBC on Wednesday, the JPMorgan CEO didn’t sound too confident that the U.S. Federal Reserve would be successful in getting inflation back to its 2% target. The things that worry him about inflation are deficit spending, “remilitarization” and a shift to a green economy. As for what looks like an imminent Fed rate cut, Dimon said it’s likely coming but he doesn’t expect it to have much of an impact.

Former Fed member says central bank missed signs of recession

Meanwhile, former New York Federal Reserve President Bill Dudley suggests that the Fed should cut interest rates soon and significantly.

“Evidence of a weakening labor market and moderate inflation has rapidly accumulated, strongly suggesting that the Fed is behind the curve,” Dudley wrote on Bloomberg this afternoon. He noted that the recent rapid rise in the unemployment rate has exceeded the threshold for the “Sahm rule” (named after economist Claudia Sahm), suggesting that much higher unemployment and a U.S. recession are on the way.

“Monetary policy is tight and is getting tighter as price and wage inflation moderates,” Dudley continued. He argues that just getting to a neutral fed funds rate would require a rate cut of at least 150 basis points, and if the Fed is to move into accommodative range, another 100 basis points on top of that would be needed.

Dudley said he expected Fed Chairman Jerome Powell’s “cautious stance” to prevent rapid easing, adding: “Be prepared for more volatility in stock and bond markets.”