Fed interest rate cuts will affect the price of Bitcoin, here's how

Fed interest rate cuts will affect the price of Bitcoin, here's how

The price of bitcoin (BTC) has been relatively stable since the last peak of 2019, with 199 million rupees on June 26th. Since then, the market has experienced a recession with several short-term and stagnant jumps in the price of 135 million rupees in recent days.

These markets are not very attractive for day traders as there is no volatility to react with profits.

It's also boring for momentum traders and trend followers because they have to wait for the trend to start again.

However, some traders were optimistic when the Fed decided to cut interest rates. Yesterday, the US Central Bank (the Fed) announced a reduction in interest rates for the first time since the 2008 financial crisis, the year of the publication of the Bitcoin White Paper. In this long-awaited announcement, Fed Chairman Jerome Powell announced he would lower interest rates by 25 basis points, or 0.25%.

Reducing Fed interest rates that may reflect the price of Bitcoin is not new. When prices fall, people spend more and save less.

At the time of the press, the price of bitcoin had jumped 4.7% for 24 hours, occupying $ 10,369 or Rp. 147 million according CoinGecko.

According to several well-known analysts, including Fundstrat Global Advisors co-founder Tom Lee, the expected rate cut could be good news.

For now, Lee seems to be right. This is the first time that the Fed has reduced interest rates in the United States since Bitcoin exists. The federal funds target rate reached its lowest level, almost nil, in 2008 before the start of the interest rate hike in early 2016. Since then, interest rates have been raised nine times reduction, end of July.

Recently, the Indian government and US Treasury Secretary Steven Mnuchin banned crypto, which described it as a "threat to national security" at a recent press conference at the White House. US President Donald Trump has also criticized Bitcoin, Libra and Cryptocurrency as a whole.

Anthony Pompliano, co-founder and partner of Morgan Creek Digital Assets, said a few days ago that the US economy was down from the previous quarter. He added that the Fed's decision to reduce interest rates or increase money supply has prompted investors to hedge against assets that are not correlated with the US dollar.

However, after the announcement of the Fed's news, the Dow Jones Industrial Average (DJIA) fell sharply. In the past, when the economic crisis worsened, the price of gold rose, as did certain "safe" currencies, such as the Swiss franc or the Japanese yen.

The limited quantity and durability of gold is a natural choice when the economic crisis occurs. So far, Bitcoin and the price of gold were closely related.

Bitcoin was designed in the aftermath of the 2009 financial crisis and has only seen the Fed's first rate cut for many years. Bitcoin is called the digital version of gold.

However, some analysts argue that Bitcoin is not a store of value. Financial writer Lawrence Meyers said borrowing money at a lower cost did not matter because only a small portion of the population could afford to borrow money for real collateral.

In addition, Meyers said that even in this case, such an amount would be very insignificant not to cause more than a slight move of the price of any security, not to mention Bitcoin.

We are not sure of this, but let us just point out that there are more reasons why we should look with optimism at the price of Bitcoin. One of them is the launch of several Bitcoin Futures Exchange, the first of which was launched.

LedgerX, Bitcoin's derivative services provider, recently launched its first physically-focused Bitcoin futures contract in the United States. Intercontinental Exchange's Bakkt Bakkt and ErisX, backed by TD Ameritrade, will do the same. Let's wait and see.

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