Bitcoin To Experience The First Fed Rate Cut In Its History
- Bitcoin rose in the aftermath of the 2008 Great Recession
- The fifth-rate cut in 25 years, Market already feeling the effect
- Bitcoin goes green, Experts says Bullish, But not all are positive
For the first time in the 10-year history of Bitcoin, the leading cryptocurrency will experience the Federal interest rate cut.
This is also the first time that the Federal Reserve will cut interest rates since the recession of 2008. This change will end an era of gradual rate increases in the wake of the Great Recession to return the economy to a more “normal” state.
At that time Fed slashed rates to near zero in an effort to rescue the economy which largely worked as unemployment is at a 50-year low, wages are rising, and the economy is growing.
However, as we previously reported, this is expected to be “beginning of the end.”
Bitcoin Rose in The Aftermath Of The 2008 Great Recession
Bitcoin first found its mention in November 2008, a few months after the Lehman crisis.
After the Financial Crisis, people were demanding a currency that is not controlled by a central authority. This is the result of banks losing their customers’ money and government printing more money that reduces the value of the money in circulation.
And Bitcoin was the answer!
In 2008, someone named Satoshi Nakamoto created a new peer-to-peer electronic cash system with no trusted third party in the aftermath of the recession.
A digital currency that is is not controlled by a centralized authority, has a limited 21 million supply, is deflationary, borderless, and censorship resistance.
The Fifth-Rate Cut In 25 years, Market Already Feeling the Effect
Now, a decade later, the Fed is expected to reduce its benchmark interest rate, marking the fifth time in the past 25 years that the central bank switched from raising to lowering rates.
In 1995 and 1988, officials made three small reductions and the economy avoided a downturn. In 2001 and 2007, deep and sustained cuts were made to stimulate the economy entering a recession.
Now, the effect of the expected fifth-rate cut can already be seen on the market.
US futures rose ahead of the Federal Reserve meeting on Wednesday while Asian stocks fell and European stocks were mixed after President Donal Trump dashed hopes for a deal as he accused China of undermining trade talks.
Bitcoin Goes Green, Experts Say Bullish, But Not all Are Positive
As for Bitcoin, experts believes it would be bullish for Bitcoin.
Woooow! The Fed is about to CUT RATES! They are reversing course, because they can't normalize rate policy, without the market collapsing! They have no exit strategy! First they cut rates, then we will see either QE4, or NEGATIVE US interest rates! OMG! So FKN bullish 4 crypto!
— MAGIC (@MagicPoopCannon) July 30, 2019
Bitcoin bull and Fundstrat’s Tom Lee recently said that a weaker US dollar would push the prices of stock and bitcoin up. Trader Bit฿it shares similar sentiments as he says,
“FOMC announcement tomorrow at 14:00 EST. Expecting to cut 25bps, the comments will be more important, if the dollar weakens bitcoin could get a backwind again.”
However, economist and trader Alex Kruger is not feeling the bulls yet as he says,
“Let's recall the last time BTC reacted to an FOMC decision. That's right, NEVER. Many crypto traders now live in an imaginary alternative reality.”
Give the fact that Bitcoin has “never” reacted to the Federal Reserve’s interest rate decisions unlike assets like gold that experiences major volatility, it’s hard to say how will BTC react this time.
Currently, BTC/USD is trading at $9,780 with 24 hours gains of 2.46%.