For the third time this year, the U.S. Federal Reserve has cut interest rates amid a global economic slowdown. However, BTC price stays stable.
The U.S. Federal Reserve has lowered interest rates by a quarter of a percentage, exactly rate by 25 basis points to a range of 1.5% to 1.75%, as it was expected.
Still, the regulator said that further reductions will not happen so soon that came as a disappointment to President Donald Trump who constantly criticizes the central bank of not cutting rates quick enough.
Be it as it may, the crypto community cannot help but wonder – how this measure will affect Bitcoin and other currencies. Bitcoin held its stable range and at time of writing was $9,140.13 falling by 1.12%. The rest of the market followed a slight correction that hasn’t had much effect on its price.
The thing is, unlike traditional assets (as S&P 500 index that immediately turned green after the announcement), Bitcoin’s price moves are pretty much hard to predict due to the relatively small size of the market. It seems Bitcoin needs more upside factors.
Tomorrow, the Fed will:
– Buy ~$2bn of T-bills permanently
– Buy up to $120bn of Treasuries & MBS overnight
– Cut the Fed Funds Rate 25bps for the 3rd consecutive timeBitcoin is a non-sovereign, hardcapped supply, global, immutable, decentralized, digital store of value.
— Travis Kling (@Travis_Kling) October 30, 2019
Crypto analysts and speculators think that nonaggressive monetary policies might be bullish for Bitcoin. The insertion of more money into the market, mixed with more affordable lending versus increasing alarms of a recession, grows investors’ hunger for even more assets. Whether it’s bonds, gold, or equities, assets traditionally recognized as safe-havens, all of it grew this year exactly because of the mentioned sentiments.
Michael Hasenstab of Franklin Templeton said in the note to customers:
“Investors need to prepare for today’s challenges by building portfolios that can provide true diversification against highly correlated risks present across many asset classes. Despite extraordinary market conditions, we see an opportunity to invest in potential hedges against global risks while aiming to build a portfolio that is truly uncorrelated to general market risk.”
Almost the same cash flow is this week overflowing European markets as the central bank plans to obtain €20 billion bonds on a monthly basis. Market analyst Alex Krüger thinks this kind of move could make the regional investors start perceiving Bitcoin as a potential safe-haven asset.
Krüger stated:
“QE would push longer interest rates lower and thus push some investors out the risk curve, i.e., seeking riskier investments to achieve desired returns. One can theorize some of that money would end in Bitcoin, adding upward pressure to prices.”
With him agrees cryptocurrency analyst Tom Lee. “Bitcoin’s becoming increasingly a macrohedge for investors against things that could go wrong. Rate cuts are adding liquidity. Liquidity is pushing money into all these risk assets and also hedges, which is helping Bitcoin,” said he earlier.
The CIO of Ikigai Asset Management Travis Kling tweeted:
Tomorrow, the Fed will:
– Buy ~$2bn of T-bills permanently
– Buy up to $120bn of Treasuries & MBS overnight
– Cut the Fed Funds Rate 25bps for the 3rd consecutive timeBitcoin is a non-sovereign, hardcapped supply, global, immutable, decentralized, digital store of value.
— Travis Kling (@Travis_Kling) October 30, 2019
The Halloween Effect
There’s a theory so-called “The Halloween Effect” that says stocks and other assets (including Bitcoin) do their best starting from October 31 through May, compared to the rest of the year. According to “Halloween strategy”, buyers are investing in an asset to hold throughout the winter months hoping for the reward after they sell it around May.
When looking at the Bitcoin charts, in 2015, October 31 through May was a sparkle bull that investors could ask for and brought more than a 41% increase. On October 31, 2016, to May 1, 2017, Bitcoin’s bull market was in high gear and brought investors a 117% return on investment. However, between October 31, 2017, and May 1, 2018, Bitcoin had set its all-time high of $20,000 but slumped harshly to $5,800 at that point.
This Halloween, Bitcoin is standing at almost the same price it was trading at on May 1, 2018. Be it as it may, on October 30, the Bitcoin blockchain reached $1 billion in cumulative transaction fees and is expected only to grow larger in the coming years.
