Experts believe that the primary push behind the numerous crypto investment is the Federal Reserve. Some investors believe that the Federal government’s excessive money printing led to the quick rise of Bitcoin as a store of value. Based on new reports, America’s central bank revealed that its interest rate would be close to zero during a recent meeting.
The meeting, which is the Open Market Committee Meeting, has significant stakeholders in the financial system. The Reserve also explained that its regular bond buys of $120 million would continue despite its interest rate decision. Some factors are necessitating the Federal body’s decision, which the Chairman disclosed.
Jerome Powell speaks on America’s economy
Like most countries, America is experiencing a downturn in its economy because of the COVID-19. To keep the economy steady, the Chairman opined that the Central Bank has to continue its current activity to reduce the present recession’s effect.
He opined that the government could not change its current strategy until the economy returns to normal. Based on the Chairman’s comment when he said there is great uncertainty ahead, it could mean that the government might set up harsher regulations to reduce the recession.
Powell said that the economy is gradually recovering, but the future seems unclear. He also mentioned the global pandemic’s effect on economic activities. Activities are not restricted, while some businesses have been closed down for months to curtail the virus’ spread. The unemployment rate is gradually increasing due to lay-offs in firms.
Also read:Because the unemployment rate is now up, the poverty level increases, as people nowadays find it hard to fend for their daily needs. The third effect is the inflation the country faces with the recession.
Things are now expensive for the average citizen, making the government reduce interest rates on loans. The government believes that people can easily borrow money and spend with the lower rates, thereby helping the economy recover.
How low-interest-rate would push investors to Bitcoin
Investors want to get high returns on their investments within a short period. With the Federal government’s decision to reduce the interest rate to almost zero, investors could take their money into an independent venture like Bitcoin.
Unfortunately, with low-interest rates mean that loan-giving and bonds would not appreciate like it should, making investors find alternatives. Experts explained that the government’s decision could increase inflation because of the low-interest rates, thereby causing money to lose value. Cryptocurrencies would be an excellent tool to store value when inflation takes a harsher turn.
The country’s interest rate policy ignited the institutional investments. Bitcoin saw in 2020 because investors found it attractive. Surprisingly, even with the lower interest rate, the digital asset saw an unexpected price increase, which led to major actors exploring the asset’s appreciation.
Gold is not left behind, as investors are putting more money into the asset to hedge against the coming inflation. Since the government insists on continuing its strategy, the crypto investment could see a rapid boost.
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