18.4 C
Manchester
June 30, 2022
Image default
Bitcoin

Bitcoin strengthens as Fed maintains interest rate

During today’s Federal Open Market Committee (FOMC) press conference, Federal Reserve Chairman Jerome Powell said the Fed will keep its fund rate unchanged from 0.00% to 0.25%.

Powell also confirmed that the Fed will maintain the current pace of balance sheet expansion with the continued purchase of $ 80 billion in US Treasury bonds and $ 40 billion in mortgage-backed securities per month. The Fed’s commitment to monetary policy dovish was expected, and the ramifications of continued easy money are extremely optimistic for bitcoin, as well as for other asset classes.

During the live stream, the US Dollar Currency Index (DXY) hit session lows, with the promise of continuous easy money sending a clear message to investors.

Source: Tradingview – US Dollar Currency Index (DXY)

POWELL SAYS TRANSITIONAL INCREASE IN INFLATION THIS YEAR WOULD NOT MEET THE TAX INCREASE STANDARD

As a result of maintaining rates at the lower limit of zero, with rising inflation, real interest rates will continue to fall even more negatively, which is extremely optimistic for all asset prices. With Powell’s comments, the secular trend of lower real rates is expected. With real yields on the Treasury curve negative, the real cost of capital is also negative, which further encourages the adoption of Bitcoin and the flight of bonds, which now offer very little positive appreciation.

POWELL SAYS WE EXPECT MORE LOW PRESSURE ON RATES

The Fed remains stuck, with the options for the central bank being somewhat binary:

Raise rates: asset prices are crushed, debt burdens increase in real terms and a deflationary spiral hits the economy, as the implications of an economic system spending collectively more than it has earned for decades are finally felt.

Keep rates at zero: let inflation “skyrocket” as real yields continue to become even more negative, and the investor class celebrates while all assets soar, with bitcoin being the biggest beneficiary as it is the only asset of the world that is 100% monetary prize 0% anything else.

Source: Bitcoin Magazine

Related posts

The adoption of cryptocurrencies in Thailand is growing. Exchange volumes increased by 600% –

Aparnna Hajirnis

To the Moon: Bitcoin reaches new record above $ 63,000

Anupreet Kaur

There will be a new type of series based on NFT –

Aparnna Hajirnis

Leave a Comment