Low US Interest Rates: Consequences for Bitcoin
Publish Date : 2019/09/17 - 11:05

US President Donald Trump called for interest rate stimulus, which would shrink the exchange rate of the US dollar.

Through his Twitter handle, US President Donald Trump called for a policy of extremely low interest rates, plus a devaluation of the dollar exchange rate.

“…The United States, because of the Federal Reserve, is paying a MUCH higher Interest Rate than other competing countries. They can’t believe how lucky they are that Jay Powell & the Fed don’t have a clue. And now, on top of it all, the Oil hit. Big Interest Rate Drop, Stimulus! “— Donald J. Trump (@realDonaldTrump) September 16, 2019

Trump has called multiple times for more significant economic stimulus. The US Federal Reserve already cut the rates this year, from 2.5% to 2.25%. But the US dollar is still at a peak against the euro, and the Eurozone is already implementing negative interest rate policy.

A high exchange rate for the dollar may hamper US exports, while encouraging other economies to produce and export their more competitive goods. But a weakening dollar may also drive some of the funds into crypto assets.

US-based investors were one of the chief drivers of the Bitcoin (BTC) markets during peak trading in 2017. But the hype soon dissipated, leaving the investors much more cautious. Now, most of the price action for BTC is concentrated on exchanges that manage to attract Chinese traders.

The suggestion that interest rates may contribute to the success of BTC has already been made, and BTC supporters may become enthusiastic if the Fed responds with a series of rate cuts.

With a policy of currency weakening, Chinese investors have found ways to switch to crypto assets. Some of the fiat does not flow directly into BTC, but into Tether (USDT). The trend also made Tether issue a new asset based on the Chinese yuan.

The questions about the Fed interest rate policy arrive at a time when BTC prices remain directionless, stagnating around $10,000. BTC trades at $10,263.39, with volumes dropping to $14 billion’s equivalent in 24 hours.

At the same time, the USDT supply has grown from 4.088 to 4.1 billion coins, possibly reflecting increased inflows and interest in trading.

Source: Cryptovest

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