Forex and Crypto News

Fed rate cuts - a chance for Bitcoin

15:03 04 March /2020

Yesterday, the Federal Reserve reduced the rates by 50 basis points. However, US President Donald Trump calls on the Fed to further cuts, indicating that the rate is still very high. It is worth noting that the discount rate is already at the pre-crisis level of 2008. Traditional markets have responded to this news with growth. But then they decided that this Fed decision was a step of despair. Dow 30, S&P500, NASDAQ then showed a decline. By the end of Tuesday, stocks also began to decline after a temporary increase in the news. Bonds showed minimal returns as investors began to seek more reliable places for their capital. However, Bitcoin did not react to this news in any way and today it is trading in a narrow range around $8700 while maintaining support by the 200-day moving average.


Lower rates are the usual event. But the Fed has less and less place for maneuver if further reductions are needed. In this case, the FRS will have to resort to a negative rate. In this case, the prospects of Bitcoin will strengthen as a refuge for capital. Since nobody wants to pay banks for the fact that the bank will use its capital. For ordinary people, restrictions on withdrawals and so on may appear, as was already the case in China. The worst-case scenario, of course, maybe the loss of capital due to bank bankruptcy.

Thus, saving capital in fiat currency looks risky. Therefore, with the approach of the crisis, the prospects of Bitcoin strengthen, and in the long run, it can indeed become a new refuge for capital.

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