Bitcoin re-tests 50k as Fed announce no change to interest rates

Bitcoin re-tests 50k as Fed announce no change to interest rates

Bitcoin re-tests 50k as Fed announce no change to interest rates

The Bitcoin price has jumped on the news that the Federal Reserve System (Fed) will leave interest rates unchanged at between 0 and 0.25%.

December's unexpectedly dour Bitcoin price performance, which on Monday saw the 47k - 50k range briefly break support, had been mostly attributed to anxiety about today's meeting of the Federal Open Market Committee (FOMC).

Tapering fears unrealised

Federal Reserve Chair Jerome Powell, who was recently re-nominated for a 2nd term by President Biden, said in a November press conference that the Federal Reserve would "start to reduce the pace of asset purchases," leading many to assume that an increase in interest rates would be announced in today's meeting.

Tapering involves a reversal of Quantitative Easing policies, such as asset purchases and so-called "money printing". The Fed has been purchasing $40 billion in US Agency Securities and $80 billion in US Treasury Securities each month. Stock prices had slumped on the fears, as tapering measures often lead to economic downturns.

According to today's Fed statement, the interest rate will remain at near zero until a full reversal to pre-Covid employment levels has been achieved. With new cases of the Omicron Covid variant spiking to record levels in both the US and the UK today, this is unlikely to happen in the near future.

Money Printer still go brrrr?

Bitcoin has retraced over 38% from its all-time-high in the past month, and many crypto influencers are already celebrating the news as a green light for the bull market to continue. It does however still remain to be seen whether or not this calming of market fears will lead to a recovery, or whether the threat of tapering and higher interest rates later down the line will still weigh on investor's minds.

It also remains to be seen whether an unprecedented spike in Covid-19 cases will spook the stock markets, and in that case, whether Bitcoin would follow as it did in March 2020.

Despite periods of Bitcoin - stock market correlation, the number one cryptocurrency marches to the beat of its own drum, and other factors such as the hash rate (which has recently recovered from the China ban, and reached a new all-time-high) and the economics of the Bitcoin halving should also play their part.

For now at least, the "Bitcoin as a safe haven from inflation" narrative can continue.

This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.

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