Bitcoin price is depressed by new statements from the US Federal Reserve

Bitcoin (BTC) price has struggled to recapture the $52,000 mark in recent days. Near this price level, bulls face major resistance, and now there is also resistance from the Federal Reserve.

The minutes of the January 31 interest rate meeting show that the US Federal Reserve has no plans to stimulate the economy in the short term.

Even if it decides to cut interest rates, The Federal Reserve says it has to be that way not also start expanding the balance sheet.


What does it all mean?

If you are unfamiliar with the world of central banking, this may sound a bit vague. But the Federal Reserve can basically control the economy in two ways. Firstly with interest rates and secondly by purchasing assets from the market (or not).

The latter is done, for example, by purchasing American government bonds, which increases the central bank’s balance sheet. However, it is currently deciding to reduce its balance sheet so that inflation continues to fall.

Shrinking the balance sheet means not replacing maturing U.S. Treasury bonds with new Treasury bonds. This results in capital disappearing from the market and ultimately less capital being available for risk assets such as Bitcoin and stocks.

For this reason, among others, it will be positive for the Bitcoin price if the US Federal Reserve decides to fully support the economy again. Not just by lowering interest rates, but also by expanding the balance sheet.

However, the US Federal Reserve now indicates in the minutes of its last interest rate meeting that a rate cut does not mean that it will immediately stop reducing its balance sheet.

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What does this mean for the Bitcoin price?

In theory, this development is bad news for Bitcoin. Nevertheless, it is not surprising that the US Federal Reserve is not yet considering cutting interest rates. Finally, the data still gives us the impression that the American economy is solid while inflation is rising again.

The only thing the US Federal Reserve would achieve now by cutting interest rates and buying up financial assets is higher stock prices and a higher Bitcoin price. However, this could also lead to inflation rising again.

In reality, of course, it’s all a bit more complex, but basically the US Federal Reserve is currently thinking about its policy.

However, the US Federal Reserve is also known for often changing its course too late. Strict policies often last too long, creating new problems. This is now a possibility again.

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