Pressure has been mounting on Chairman Powell to reverse his programme of continuously raising interest rates after a series of high profile bank failures in the US, which many believe happened directly as a result of his policies. Many people believe this could be extremely bullish for the crypto space.
If Powell lowers interest rates it will be easier to attract capital
Many prominent figures such as Elon Musk has been urging the Federal Reserve to cut interest rates immediately, with the aforementioned explaining that the data the Federal Reserve relies upon to make decisions has very low latency.
There are man who expect that further rounds of quantitative easing are highly likely in order to keep the situation under control, particularly considering the international partnerships that are being formed to strengthen global liquidity at the time of writing.
GLOBAL CENTRAL BANKS TO ENHANCE LIQUIDITY VIA USD-SWAP LINE.
— Breaking Market News (@financialjuice) March 19, 2023
Crypto prices may perform well in an inflationary environment
The main reason that Chairman Powell had been raising interest rates so much had been the concern that the Federal Reserve will crash the economy: there is a huge degree of leverage in the financial system and this could create a domino effect after a few big players (such as those who fell last week) begin to fail.
In an inflationary environment, assets such as Bitcoin may perform exceptionally well, since there is a fixed supply that is known in advance and there is no way to debase the asset.
The last time that the Federal Reserve embarked on such a policy of quantitative easing in 2020, the prices of major crypto assets soared, with the value of BTC appreciating from a little over $3k to peaking out at $69k.
However it is worth noting, particularly now that concerns over hyperinflation abound, that there is a risk of supply chains breaking down, which would be extremely problematic for the industry, and the global economy more widely.
Relevant news:
- 10+ Best Altcoins to Invest in 2023 – Which New Altcoins to Buy?
- Our Cryptocurrency Guides
- How to Buy Bitcoin – Beginner’s Guide
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This article was written for Business 2 Community by Jamie McNeill.
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