The Fed floods the markets and Bitcoin goes up
The Fed floods the markets and Bitcoin goes up
Bitcoin

The Fed floods the markets and Bitcoin goes up

By Marco Cavicchioli - 23 Mar 2020

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Today, the price of bitcoin rose by about 7% following the Fed’s announcement of unlimited purchases to support the financial markets. 

Shortly before the US stock exchanges reopened, after the customary weekend break, the US Central Bank announced the launch of some new programs to stabilize the financial markets

These measures include a commitment to continue to purchase assets indefinitely as part of the new quantitative easing

This new injection of dollars into the financial markets, for the time being without time limits, has allowed stock markets to open only slightly lower compared to Friday’s closing, despite the not at all reassuring news from the US about the coronavirus emergency. 

The price of Bitcoin goes up

It appears that the price of bitcoin also benefits from it, going from about $5,900 to $6,300 in a few moments, and then settling in the $6,200 area. 

This new “QE infinity” is, in fact, the most aggressive intervention that the Fed has done so far in the markets since these have started to fall due to the pandemic.

According to the chief financial economist at MUFG Union Bank, Chris Rupkey:

“The central bank is shifting from being not just the lender of last resort, but now it is the buyer of last resort. Don’t ask how much they will buy, this is truly QE infinity”. 

The fact is that these initiatives consist of generating from nothing and introducing a large number of dollars into the financial markets, with some of them probably spilling over to the crypto markets as well. 

Even gold, for example, has risen by almost 1.5% on the dollar today, after several days of stagnation or even slight weakness. 

Moreover, since the Fed’s objectives this time also include helping the real economy and not just the financial markets, it is possible to assume that some of the money created will also end up pouring into the consumer markets, perhaps even causing inflation to rise. 

If this is the case, it could also benefit bitcoin in the long run, as it has a finite money supply, not expandable at will, inelastic to the market, and strictly fixed by a de facto unchangeable computer protocol. 

Consequently, there could be two repercussions on the price of bitcoin from these new initiatives of the Fed: in the short term, a part of the dollars placed on the financial markets could spill over to the crypto markets for speculative purposes, while in the long term the possible inflation of the dollar could favour the purchase of bitcoin as a store of value

 

Marco Cavicchioli
Marco Cavicchioli

Class 1975, Marco teaches web-technologies and is an online writer specializing in cryptocurrencies. He founded ilBitcoin.news, and his YouTube channel has more than 11 thousand subscribers.

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