The price of Bitcoin has been volatile for the past couple of weeks and recently the events have turned bearish. From making record-breaking climbs in January, the world’s largest cryptocurrency was on a decline just like the mainstream financial markets.
On March 3, Bitcoin’s price fell again as the United States Federal Reserve announced a cut in interest rates after the markets were negatively impacted due to the spread of Coronavirus.
The Fed cut the interest rate by 0.5 percentage on Tuesday causing the entire financial market to sit up and take notice. Usually, rate cuts are elaborate and planned but this time around, the declaration was in emergency. This was the first unscheduled rate cut since the 2008 global recession. It was also the single biggest one time cut since the market crash twelve years ago.
Jerome Powell, the Chairman of the Feral Reserve spoke about the rate cut and how it was done to protect American citizens. He said:
“With the latest cut, a lot of capital range will be freed. The rate cute will help keep the economy strong and I assure you that all financial fundamentals remain strong. The unemployment rate is at a half century low while wages are on the rise. The Coronavirus has brought more challenges and risks to the ecosystem and our thoughts and prayers go out to everyone affected by the virus.”
The new benchmark interest rate is between the range of 1 percent and 1.25 percent. Cryptocurrency enthusiast was surprised at Bitcoin’s fall because the currency usually remains stable during times of financial tension. Bitcoin’s price had also taken hit after the Fed announcement and was currently trading below the $9000 region.
At press time, Bitcoin was trading for $8780 with a total market cap of $160.256 billion. After a weekly price fall of 4.22 percent, the cryptocurrency’s 24-hour market volume was at $39.75 billion. Bitcoin’s fall had also triggered price falls in altcoins such as Ethereum, XRP and Bitcoin Cash.
While Bitcoin fell, the S&P 500 index witnessed a downturn of 1 percent. Economists following the aftermath of the virus have said that the spread will shave off another 0.5 percent of the global economy in the coming weeks. Institutions such as the IMF, the World Bank and the Bank of Japan have also joined hands with the Fed to come up with solutions to tackle the Coronavirus fallout.
Powell added that the rate cut was the product of a decision taken after grueling analysis. The US Federal Reserve first started raising interest rates in 2015 and since then only the 2019 rate cut has stood out as an anomaly. Many cryptocurrency organizations opined that they were not shaken by the sudden decisions taken by the Fed.
It impossible to predict what the ramifications of the rate cut will be but US President Donald Trump was not one to care. He praised the latest proceeding and further said that the agency needs to look into more cuts in the future. It is now up to both the communities, crypto and fiat, to manage further hits to the economy.