Follow us on or join ours

Donald Trump once again blackmailed the boss FED, Jerome Powell. He accused him of not taking decisive action in relation to the current economic situation. He even threatened to dismiss him if interest rates are not reduced to zero.

FED cuts interest rates ... again!

We didn't have to wait long for the reaction. On Sunday, at an unplanned meeting, the US Federal Reserve decided to cut interest rates by a record 1%. Let us remind you that just two weeks ago it already reduced interest rates by 0,5%. As a result, in a short time days interest rates were where they were after a series of reductions related to the 2008 financial crisis - which is currently zero!

It is worth recalling that raising interest rates results in more expensive loans and lower availability. It is a method of cooling a hot economy in times of prosperity. On the other hand, lowering interest rates is responding to the economic slowdown. Relief for borrowers and cheaper and more easily available loans that can fuel the economy in difficult times.

However, please note the chart above. In subsequent cycles, interest rates reach lower peaks and the wells are deeper and deeper. Interest rates have already reached zero after the recent crisis. However, during the last big bull market on the stock market they did not exceed 3%. In this regard, the FED no longer has too much scope for action, because negative rates create such a pathological situation as the one in which the person granting the loan pays interest, and not the person taking the loan.

However, this is not the end of madness. In addition to lowering interest rates, the Fed has announced QE, or quantitative easing.

What is that?

It's a pretty name printing money. This time, the FED will pump 700 billion dollars into the inefficient system, "created" from the air.

By lowering interest rates, Trump and the FED want to help the economy in a difficult situation related to stagnation forced fight coronavirus.

However, this is not the only virus attacking the global economy. Even worse virus seems to be the policy of central banks, whose activities focus on destroying the value of fiat (traditional) money and turning the financial system upside down. Interest rate cuts and reprints are conducive to rising inflation, which has been raging in the world for a year and affecting the savings of billions of people.

A massed print of money also can't last forever and will eventually stop working. While it helped to get out of the 2008 financial crisis, it may not be enough today, because the GDP growth in many countries in the last decade was based on cheap money and mass indebtedness of enterprises, which should have fallen long with higher rates.

FED cuts feet - what does bitcoin say?

In response to such actions of central banks, the opposition financial system, i.e. Bitcoinshould gain. However, this does not happen.

Bitcoins will always be the same. Unlike fiat currencies, e.g. USD printed on power, nobody can print bitcoins (except forks). Inflation is constant and well known and planned. Nobody controls interest rates on bitcoin. The moments and rules of halving, i.e. the distribution of the digging prize, are also pre-established, known and clear.

So why, during the crisis we are dealing with now, does capital not escape from broken and printed dollars to the predictable and modern bitcoin?

Probably because bitcoin has become a mere speculative instrument. One of the many toys to earn on changing course. Hardly anyone takes him seriously. Hardly anyone uses it to pay. 99% of transactions in the bitcoin network are stock speculation.

Also check: Shares are falling, bitcoin is falling! Stock and cryptocurrency correlation

How did the Bitcoin exchange rate react to information that the Fed is cutting interest rates?

The reaction of the Bitcoin exchange rate is that the Fed cuts rates

Once again, it turned out that bitcoin reacted similarly to traditional markets. The sharp rise in price after information that the Fed cuts interest rates has been used by ruthless speculators to realize profits and / or assume short position, i.e. start shorten bitcoin. As you can see, the cryptocurrency market is ruled by absolute speculation. Trainees decide the course of the course.

Traditional currencies, or fiat, are based on faith in the value of cash. As you can see, there is no faith in the cryptocurrency market. Few believe in the future of bitcoin as an alternative monetary system, digital gold, safe harbor for times of crisis. The vast majority do not buy bitcoin to pay or store value in it, because they trust its technology and foundations, but buy it to quickly sell more expensive.

Tokeny.pl is a cryptocurrency site run by a crypto team of enthusiasts. The main area of ​​our interest are cryptocurrencies, tokens, personal tokens as well as blockchain technology. On the pages of our website we will present independent cryptocurrency reviews and interesting articles from the market. In addition, we present the current rates of all critics. The site also has a multi-functional cryptocurrency calculator as well as traditional currencies.

The information published on the cryptocurrency tokeny.pl website are not financial recommendations and do not constitute investment recommendations within the meaning of the Regulation of the Minister of Finance of 19 October 2005 on information being recommendations regarding financial instruments, their issuers or issuers (Journal of Laws of 2005, No. 206, item 1715). The information published on the pages of the portal does not constitute an offer. Tokeny.pl is not responsible for any decisions taken under the influence of data presented on the Website. Portal does not bear any responsibility for the possible use of information on the website.

Investments in OTC market instruments, including currency exchange rate (CFD) contracts, due to the use of the leverage mechanism, entail the possibility of incurring losses exceeding the value of the deposit. It is not possible to make a profit on transactions on OTC instruments, including currency exchange contracts (CFDs) without risking a loss, therefore contracts for exchange differences (CFDs) may not be suitable for all investors.

© Copyright 2019 Tokeny.pl

My Newsletter

Sign Up For Updates & Newsletters