Fed Chairman Jerome Powell signaled on Friday that the central bank was prepared to cut interest rates to support the economy against the impact of an expanding global recession and potential health emergency. spread by COVID-19.
Federal Reserve Chairman Jerome Powell
But whether those investors turn to Bitcoin as a crisis barrier remains to be seen.
Theoretically, the Fed could help Bitcoin prices because lower interest rates could reduce the attractiveness of income-generating assets like US Treasury bonds, according to analysts. So far, the Fed has not made it clear whether they will cut interest rates or not, all of them are waiting and seeing President Jerome Powell's attitude.
"The Fed is closely monitoring their developments and their implications for economic prospects. We will use our tools and act accordingly to support the economy. ", Powell concluded.
The 10-year US Treasury yield dropped 0.15 percentage points to a new record low of 1.14%, indicating high demand; Bond prices move in the opposite direction to yields. The exchange rate also dropped on UK government bonds. Germany and Japan fall deeper into negative territory.
Greg Cipolaro, co-founder of Digital Asset Research, a New York-based cryptocurrency analysis firm, said when interest rates dropped, it was more likely that people were leaning towards unprofitable assets. such as gold or bitcoin.
Analysts and traders in the nascent market have debated whether bitcoin is being traded as a hedge against instability in traditional markets. Some investors say bitcoin is mostly incompatible with other types of assets, sometimes trading in sync with stocks.
Currently, the bitcoin market may be too immature for large investors with a diverse portfolio of assets to use as a hedge against the financial crisis. Indeed, the falling price of bitcoin in recent days – gold has also dropped – could signal that most investors are still scrambling for cash when there is a major sell-off in the market.
"We see a lot of this global action affecting bitcoin, but there are also things going on within the bitcoin network itself and that could have a bigger impact than the Fed cutting interest rates. I continue to raise the price of bitcoin this year and the main reason is halving, "said Joe DiPasquale, CEO of hedge fund focused on cryptocurrency BitBull Capital in San Francisco.
The Bitcoin price has dropped 13% since Sunday, following the worst weekly performance since mid-November. It has dropped to the $ 8,500 area, its lowest level in a month.
Bitcoin price today. Source: Coinmarketcap
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