Bitcoin has long existed independent of other facets of the financial markets. Though analysts have recently started to draw correlations between events in the macroeconomic and finance world to the price action of cryptocurrencies, BTC included.
An event just took place that a leading analyst says could be a headwind for assets like Bitcoin and gold in the coming months and years.
On Wednesday, the Federal Open Market Committee of the Federal Reserve revealed that it would be holding off another policy interest rate cut, which comes after a series of cuts that some say boosted liquidity, and thus the price of Bitcoin.
Kevin Kelly of industry research boutique Delphi Digital recently remarked that this may act as a potential headwind for Bitcoin and gold, which many say are both hedges against financial recession and low interest rates, “assuming real yields continue their move higher.”
The #Fed will hold off on another rate cut at today’s FOMC meeting, marking a modest (but notable) shift in policy going forward.
— Kevin Kelly, CFA (@Kevin_Kelly_II) December 11, 2019
Negative Rates Still on Their Way
While the Federal Reserve is putting a pause on its interest rate operations, some say it is only a matter of time before lower interest rates grace the U.S. financial market.
In September, President Donald Trump wrote on Twitter that the Federal Reserve needs to “get our interest rates down to ZERO, or less.”
This assertion came shortly after the former chairman of the Federal Reserve, Alan Greenspan, said that it is only a matter of time before the U.S. (and thus the rest of the world) implements negative interest rates on a widespread scale.
Bitcoin, the Perfect Response to Central Bank Madness?
Many say that in these tumultuous macroeconomic times, Bitcoin is the perfect solution. When sovereign debt bonds and bank accounts carry a negative interest rate, it makes sense for investors to allocate their capital to an asset that produces better yields, like the 0%-yielding Bitcoin or gold. Also, some think that monetary policy will eventually lead to rampant inflation in sovereign currencies, validating the need for something like Bitcoin, which is disinflationary and non-sovereign.
This has been corroborated by Jim Reid, Head of Global Fundamental Credit Strategy at Deutsche Bank, who earlier this year said that if central banks are aggressive with their monetary policy, then alternative currencies and investments like Bitcoin and gold become somewhat tantalizing.
Reid continued in a Deutsche Bank research report published on the future of finance that the collapse of fiat currencies, should it happen, will send cryptocurrencies and gold flying.
As Travis Kling, the chief investment officer of Ikigai, has said on multiple occasions, “Bitcoin is like a CDS against fiscal and monetary policy irresponsibility”.
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