Many factors are contributing to Bitcoin’s renewed trajectory towards its USD 100,000 target. One of them is increasingly gaining prominence: The U.S. Federal Reserve.
Fed Interest Rate Cuts to Weaken Dollar and to Strengthen Bitcoin
The U.S. Federal Reserve’s latest moves might be unintentionally propelling Bitcoin to new 2019 highs with renewed impetus. On Jun 19, 2019, Jerome Powell, the chairman of the Fed announced the decision to maintain the benchmark for the federal funds interest rate within the target range of 2.25% to 2.5%.
However, upon review of the statement, financial experts noticed that The Federal Open Market Committee (FOMC) made several changes to its policy statement. Most relevant, the term “patient” was replaced by a policy language promising to “closely monitor the implications of incoming information for the economic outlook.”
For many, this is a hint that inflation and geopolitical risks are putting pressure on Federal Reserve officials to advance the case for an interest rate cut.
As a result, investors on the trading floors are already betting that the Fed will lower the rates as soon as July, putting the dollar under pressure.
In contrast, investors believe that a Fed rate cut would propel Bitcoin and gold to higher values. For example, according to CNN digital correspondent Paul La Monica,
That has been viewed as a positive for bitcoin as well as gold, which are looked at as alternative currencies that should rally when central banks take actions that reduce the value of government-backed currencies.
Moreover, Central Bankers perspective about Bitcoin might be shifting from a negative to a more positive outlook.
Last week, both Fed Chairman Jerome Powell and his counterpart Bank of England Governor, Mark Carney, reportedly advised that central banks “should look at bitcoin and other cryptocurrencies with an open mind,” writes La Monica.
Moreover, Carney has made it clear that he favors imposing strict controls. At a conference organized by the European Central Bank in Portugal, referring to cryptocurrencies, Carney pointed out, “Anything that works in this world, will become instantly systemic and will have to be subject to the highest standards of regulations,”
More regulations, according to La Monica, would bring benefits to the crypto markets, by smoothing Bitcoin’s volatility and helping to further validate Bitcoin’s legitimacy in global financial markets.
Gold And Bitcoin Solidify Their Safe-Haven Status
In addition to a Fed rate cut in July and a weak dollar, another key factor affecting the financial markets and Bitcoin, in particular, is, as the Fed statement put it, “uncertainty.”
Given the ongoing Brexit upheaval, China/U.S. trade war, Hong Kong demonstrations, and the Middle East rising tensions, gold and Bitcoin are moving to the foreground as safe-haven assets.
Bitcoin takes aim at $100,000 target. $btcusd is experiencing its fourth parabolic phase dating back to 2010. No other market in my 45 years of trading has gone parabolic on a log chart in this manner. Bitcoin is a market like no other. pic.twitter.com/wE4j3riMgI
— Peter Brandt (@PeterLBrandt) June 22, 2019
Thus, as of this writing, gold reaches a five year high, hovering on the USD 1,400 per pound. And Bitcoin just smashed through the USD 11,000 mark, within 24 hours of having surpassed the USD 10,000 price barrier.
What are your thoughts on the possible Fed rate cuts and recent Bitcoin’s price surge? Let us know in the comment section below!
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Images via Twitter/@PeterLBrandt, Reddit