Will the Recent Federal Reserve Rate Hike Benefit Bitcoin (BTC) Positively or Negatively?

According to a recent report by CNBC, the US Federal Reserve has officially increased its interest rate by a quarter point (from 2.25% to 2.50%).

While on paper, such a small increase might not mean much to the average person, it is worth noting that this has been the fourth such hike of this year. To put things into perspective, Central Banks are known to gradually increase interest rates so as to slow down the economy as and when inflationary signs start to appear.

Is The United States Economy On The Brink Of Facing Another Crash?

Over the course of the past few months, many analysts have been saying that the US economy is on its way to experiencing another major meltdown (much like the one it faced in 2008). For example, earlier this year Marko Kolanovic of JP Morgan pointed out that while a likelihood of a major crash right now was “low”, it would not be surprising to see the US economy tumble sometime in the latter half of 2019. Elaborating further on his comments, Kolanovic said that the exact timing of the crash is dependent on the speed at which the Fed “hikes interest rates and reverses bond purchases”.

In Wake Of Latest Interest Hike, Stock Market Experiences Significant Drop

Talking with a major media outlet recently, Mati Greenspan of eToro, was quoted as saying that the current drop in the US markets “was to be expected” (since many from within the trading community had predicted the Federal Reserve to increase its interest rates sometime in December).

With that being said, Greenspan did add that this time the drop in the market felt a bit different than before. Elaborating further on his stance, he said:

“What really dropped the markets though, was that the Fed didn’t at all seem sympathetic to the current market turmoil. They indicate that they’re not about to hike rates aggressively unless the economy grows quicker. However, they seemed unwilling to reduce the pace of their quantitative tightening. Meaning, that they will continue to reduce the size of their enormous balance sheet, which is still way over inflated from 10 years of quantitative easing.”

Will Bitcoin Benefit From All This Madness?

It is being estimated that this latest move by the Federal Reserve could have a negative impact on the market as a whole (especially on regular borrowing i.e. mortgages etc). For people who are aware of what such things mean, it now appears as though early signs of trouble within the US economic system have started to appear again. As a result of this, we could now see more and more investors start to hedge BTC and other cryptocurrencies in the near future.

In this regard, controversial entrepreneur Kim Dotcom, released a tweet earlier this week where he claimed that the US Dollar was on its way to becoming “worthless” and that right now was the perfect time to hedge against a market crash using BTC and Gold.

Final Take

As things stand, it is worth noting that the crypto market at large is currently on the slide (with the value of most premier crypto assets down by around 70% and 92% due to the prevailing market conditions). Thus, right now would be the perfect time to invest in some Bitcoin if you haven't already done so.

Publication date: 
12/21/2018 - 18:09
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