Bitcoin Forum

Hi all, I'm new to Crypto market. Would like to ask will US drop interest rate affect Crypto market in future ?  Because I heard some people said that US drop interest rate = create biggest bubble and might explode next year (financial crisis). If this financial crisis happen, will it affect Crypto market ? If yes, will Crypto market rise or drop ... ?

Don't get your hopes up on cryptocurrency prices going up when a financial crisis happens. As far as I know people are more likely going to sell their crypto for them to be able to actually spend money on basic day to day needs. So yea, I'm betting more of a drop(though I hope not). Though bitcoin is made to protect us against economic crises, always remember that the markets are currently really irrational. A lot of people have money on cryptocurrencies for speculation and a lot less as a hedge.

Usually investors have more money invested than what they can spend on food and daily needs, but during  financial crisis there are mainly two types of people doing two different things

Group A : Selling their commodities to save their business ( They need dollars)
Group B : Buying commodities to save their investments  

So depending how bad the crises are, anything can happen, but during the first phase of financial crises, you should expect lack of dollar liquidation and a ton of commodities liquidations (Gold,Silve and probably BTC) will go down in price , central banks will need to react and attempt to save the world economy by printing more money like they always do (they call it quantitative easing to make you feel better about it ) , at that point of time people will be buying everything they get their hands on, and BTC won't be any different.

I would just like to point out that the cut in interest rate is, in part, to reduce the risks of recession thanks to trade crises. Just because it was done in the 2008 financial crisis doesn't mean they're expecting one this time around -- the US economy is actually having a solid performance  (https://www.reuters.com/article/us-usa-fed-history/that-bad-how-the-us-economy-stacks-up-to-past-rate-cut-cycles-idUSKCN1UO0ES)by most indicators. I don't know where you heard what you did, but people have been predicting the start of the next financial crisis since the last one ended, and some of them have the tendency to exaggerate.

As for crypto on financial crises, the answer is that no one knows for sure, because it hasn't been tested yet. It could easily go both ways, but I personally lean on believing it won't do too well, because people would normally be averse to making any risks during that period.

I guess it depends who you ask. I've noticed a significant uptick in recession talk lately. Things like this:

• Recession fears have hit an all-time high, a new Bank of America survey shows (https://markets.businessinsider.com/news/stocks/next-recession-credit-investor-fears-at-record-high-baml-survey-2019-9-1028527863)
• Fed’s James Bullard says US manufacturing appears ‘in recession’ (https://nypost.com/2019/09/20/feds-james-bullard-says-us-manufacturing-appears-in-recession/)
• Here’s a list of recession signals that are flashing red (https://www.cnbc.com/2019/09/02/heres-a-list-of-recession-signals-that-are-flashing-red.html)

Financial crises tend to negatively affect speculative and investment assets, so common sense says that applies to Bitcoin as well. The question is, how much will it affect Bitcoin? Nobody here knows for sure.

Well I don't know about this. Last crisis was started by the housing bubble burst and yet, despite the crash housing markets are still getting inflated worldwide. Like nothing happened, investors seem to be oblivious to prior events.
I think you would agree that housing market is at the same time speculative and an investment asset, as such simply contradicts your commonsensical hypothesis. I track a few very successful, classic traders and they tend to agree about the role of cryptocurrency in modern trading. Safe haven they say, declaring about 30% of the assets to be secured in crypto. Thus my feelings about the upcoming difficulties are rather optimistic, if their declarations are real and common, stabilisation for crypto markets may be expected.   

Pretty much. While I'm betting that there will be a lot more people from Group A for obvious reasons, only time will tell. In the end, we're just speculating on what will happen. Though the chances are very low in my opinion, there's also a chance that more money would flow into bitcoin if suddenly the public(especially the bigger names outside the bitcoin community) would be telling people to put money into bitcoin, hence the price rises, and it causes a sort of reverse domino effect à la 2017 bitcoin price bubble. Again though, I doubt it.

An interest rate drop would open up easier credit, which would in turn flow into capital markets. So a drop in rates would theoretically positively benefit bitcoin's price, all else being equal.

One of the main channels of monetary policy transmission is the asset channel, which bitcoin is a class of.

However, your suggestion that there is some sort of cause and effect between a rate cut and a financial crisis is unclear/unjustified. I'm not sure if you were misinformed or potentially misled into thinking this, but generally monetary policy is countercyclical, i.e. in response to financial conditions.

The bubble's been filling up for a number of years now. But then, I've been seeing a global financial crisis almost every decade or so. Lived through the 1997 Asian one. Lived through the 2008/2009 economic crisis that supposedly set off Bitcoin on its path of no return.

That's around 11 years apart. We're kind of due one next year, though some economists will argue we're already actually in one right now.

It's going to be bad for everyone. I'm not thinking Bitcoin will benefit, at least not immediately. People who need cash and don't have it aren't going to be buying Bitcoin, is my simple logic.

It may, we just don't know the results yet. Yeah, we are in a bear run right now but we also should look at it in a long term deal instead of just one time deal. Short terms are always short sighted and never reflect on the long term affects of it. Just to give an example, 2008 crisis crafted the bitcoin idea and in Cyrus when there was a crisis people bought over 700k dollars worth of bitcoin (at the time that was a huge amount), however last year when stocks went down, bitcoin went down as well.

As you can see just because A happened when B happened doesn't mean A will always happen when B happens. It is just one time, lets spread it over decades to realize what would happen each time and try to find some sort of pattern, without that we are not gonna have a big example.