On Tuesday, the US Federal Reserve gave the markets what they needed. Now it cut interest rates by 50 basis points. The United States intends to protect the longest-running economic growth from the spreading coronavirus (Covid-19) this way.
The Federal Reserve is cutting but must further ease and, most importantly, come into line with other countries/competitors. We are not playing on a level field. Not fair to USA. It is finally time for the Federal Reserve to LEAD. More easing and cutting!
— Donald J. Trump (@realDonaldTrump) March 3, 2020
The Fed statement also said that the fundamental indicators of the US economy remain strong. The Federal Reserve made such a decision after the conference call by Powell and G7 officials. As a result of the event, the officials assured that they would use all relevant policy tools to achieve strong, sustainable growth and protect against the risks of price reductions. The same statement sounded Jerome H. Powell on Friday.
Last year, the Fed cut the rate three times – from 2.25-2.5% to 1.5-1.75%, citing the consequences of a trade war with China. In December all members of the Federal Open Market Committee (17 members) considered the mission accomplished. That time they have called for gradually moving towards a stronger policy (from 2020-2021).
But the Covid-19 epidemic, which is spreading rapidly around the world, has violated these plans. In March, the Fed will reduce the rate immediately by 50 basis points.
Is This A Huge Opportunity for Bitcoin?
At first glance, it may seem strange to analyze the effect of this rate on the Bitcoin exchange rate. It would seem, how can this affects the first cryptocurrency, which was created as a response to the imperfection of the policies of central banks and the global financial system as a whole. Moreover, digital gold almost does not correlate with traditional financial assets. Therefore, how can the US monetary regulator influence it?
However, empirical evidence suggests that after the Fed’s decision, the BTC price went up sharply to the level of $8,921. Almost traditionally protective assets such as gold, the Japanese yen, and the Swiss franc rose in price almost simultaneously with Bitcoin.
But it has corrected at $200. At the press time, BTC is trading around $8,730.
Hence, many market participants have opted for a haven instead of risky financial instruments.
The analysts are sure that in the conditions of low profitability of traditional financial instruments, gradual devaluation of currencies and increasing global uncertainty, Bitcoin looks like an alternative that is not inferior in attractiveness to gold and other protective assets.
FED SAYS TO CUT TARGET FEDERAL FUNDS RATE BY 50 BASIS POINTS TO RANGE OF 1.00 PCT TO 1.25 PCT
This is huge.
Stocks, gold and bitcoin pumping.
— Alex Krüger (@krugermacro) March 3, 2020
Like other market analysts, Bitcoin traders will closely monitor the Fed and its statements about future changes in monetary policy.
Bitcoin Halving Is Around The Corner
Bitcoin is favorably distinguished from fiat currencies by the predicted issue and a strictly limited offer. Therefore, more than 80% of digital gold has already been mined, while several million coins are simply lost and, therefore, the supply on the market will never reach 21 million BTC.
Besides, in the middle of May, Bitcoin miners expect a halving that will slash the block reward by 50%. To date, the cryptocurrency market is in a correction, but we need to wait for what would happen in the long term.