The Fed Cuts Interest Rates as the Virus Spreads

[allthingsbtc]

The Fed Cuts Interest Rates as the Virus Spreads https://bravenewcoin.com/insights/will-an-interest-rate-cut-push-investors-into-bitcoin


How the effects of the global coronavirus epidemic will play out in the crypto markets remains to be seen but as digital gold and as an alternative currency, bitcoin looks well-positioned to withstand the potential storm ahead.

As quoted above -BUT! Despite the instances of pullback, is the downside move primarily fueled by Coronavirus fears?

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[o_e_l_e_o]

The Fed cutting interest rates by 0.5%, the largest cut since the financial crisis, before the looming recession has even begun, is not a good start. With rates already this low, there is little scope to cut them further. The deficit is at $1.1 trillion and ever growing, and the Fed is already printing money to prop things up with their "definitely-not-QE" overnight repos. Even without coronavirus a recession was probably on the cards. The economy is definitely going to get worse, and there is going to be very little slack like there was 12 years ago to stimulate it once the infection has played out.

I'm also not sure what this is supposed to achieve. Cutting interest rates makes money cheaper to borrow, so stimulates borrowing and investment. But the issue here isn't a lack of investment, though. The issue is a lack of production. Mass quarantines are resulting in supply chains collapsing. They are shutting down production. There are workers who either can't get to work, or have nothing to work on. There is money to be spent, but nothing to spend it on. You are now throwing more money at an already saturated market. All this results in is more inflation.

It's at times like this I am really happy we have bitcoin as a hedge against this mess.

[exstasie]

The Fed cutting interest rates by 0.5%, the largest cut since the financial crisis, before the looming recession has even begun, is not a good start. With rates already this low, there is little scope to cut them further.

That's one way to look at it, but it's quite a pessimistic view and it's partly based on the assumption that a recession is imminent. That's a commonly held belief but in my experience, the crowd is usually very wrong about these sorts of market predictions.

My contrarian view is this:

Between China's recovery and the ridiculously excessive fear around the corona virus in the US, and now the emergency rate cut on top, this is a recipe for a strong recovery and eventual new ATHs. We will probably look back at this period as just another consolidation before a bullish 2020-2021.

Here is a look at how the swine flu affected the stock market in 2009-2010. Different context I know, but important to think about. It's hard to stop a bull market:

The corona virus FUD is being insanely blown out of proportion. The common flu is much more serious and deadly. This looks like a slightly more serious replay of the SARS scare from years ago.

The Fed knows this. Smart (institutional) money knows this. It's retail investors who are getting massacred by the corona virus FUD. Look at this shakeout:

The issue is a lack of production. Mass quarantines are resulting in supply chains collapsing.

That's a bit exaggerated. Researchers expect China’s GDP growth to fall by 0.6%-1.9% in 2020 as a result of the corona virus. In other words, GDP growth of 4.1%-5.4%.
https://www.theguardian.com/world/2020/feb/19/coronavirus-could-cost-global-economy-1tn-in-lost-output
https://www.wsj.com/articles/the-coronavirus-is-hammering-chinas-economic-outlook-11582973208

[Febo]

How the effects of the global coronavirus epidemic will play out in the crypto markets remains to be seen but as digital gold and as an alternative currency, bitcoin looks well-positioned to withstand the potential storm ahead.

Bitcoin will follow stock exchange. When Dow Jones will go sub 15000, Bitcoin will go sub $5000. Difference will be that Dow Jones will need years to recover back to 30000 points, Bitcoin will need few months to get back to $10000.   Yes, the coronavirus will most likely trigger recession and a stockmarket crash beside many other crashes.

[exstasie]

Yes, the coronavirus will most likely trigger recession and a stockmarket crash

We'll see about that. The prevailing sentiment about the global economy reminds me of some harsh bull market corrections in BTC's history. The Winklevoss ETF rejection in March 2017 and China's banning of BTC exchanges and ICOs in September 2017 come to mind. During those pullbacks, most people thought the sky was falling and the bull market was dead. They were wrong and a new ATH was just around the corner.

The corona virus will obviously affect GDP growth, the question is to what extent. That's what the markets are pricing in right now. Some people see doomsday, others see blood in the streets = buying opportunity. In hindsight, I think this will be seen as a buying opportunity.

[coingecko]

Bitcoin whitepaper was released almost 10 years ago, when the economy is in flux and rate cuts

[davis196]

The Fed Cuts Interest Rates as the Virus Spreads https://bravenewcoin.com/insights/will-an-interest-rate-cut-push-investors-into-bitcoin


How the effects of the global coronavirus epidemic will play out in the crypto markets remains to be seen but as digital gold and as an alternative currency, bitcoin looks well-positioned to withstand the potential storm ahead.

As quoted above -BUT! Despite the instances of pullback, is the downside move primarily fueled by Coronavirus fears?

The fear of coronavirus is bigger than coronavirus itself.
How many Americans are confirmed with coronavirus?AFAIK,there are 230 confirmed cases.Is this a lot?No.
How can lower interest rates help for fighting COVID-19 or lowering the panic across the financial markets?
How can Fed help with this?I have no idea....
This makes me wonder about all the conspiracy theories that COVID-19 is created by someone in order to spread some panic and manipulate the world economy and financial markets.This hypothesis will never be proved with any evidence.

[Febo]

The Fed Cuts Interest Rates as the Virus Spreads https://bravenewcoin.com/insights/will-an-interest-rate-cut-push-investors-into-bitcoin
How the effects of the global coronavirus epidemic will play out in the crypto markets remains to be seen but as digital gold and as an alternative currency, bitcoin looks well-positioned to withstand the potential storm ahead.

As quoted above -BUT! Despite the instances of pullback, is the downside move primarily fueled by Coronavirus fears?

How many Americans are confirmed with coronavirus?AFAIK,there are 230 confirmed cases.Is this a lot?No.

Not that related to this but I just noticed.  USA had 14 deaths and 240 confirmed cases.  That is far away from ratio of other countries. Switzerland have one dead and 214 confirmed cases. South Korea have 43 dead and 6593 confirmed cases. Something is not right with USA. Or medical care of confirmed is not good enough or there are many more confirmed cases than the ones reported.

[o_e_l_e_o]

Something is not right with USA.

The United States has the worst healthcare system in the developed world, and also some of the most unhealthy citizens in the world, with well above average rates of obesity, diabetes, heart disease, and so on. Patients with other serious comorbidities are the ones most likely to die from coronavirus.

[panganib999]

The Fed Cuts Interest Rates as the Virus Spreads https://bravenewcoin.com/insights/will-an-interest-rate-cut-push-investors-into-bitcoin


How the effects of the global coronavirus epidemic will play out in the crypto markets remains to be seen but as digital gold and as an alternative currency, bitcoin looks well-positioned to withstand the potential storm ahead.

As quoted above -BUT! Despite the instances of pullback, is the downside move primarily fueled by Coronavirus fears?

The fear of coronavirus is bigger than coronavirus itself.

Agree to this one, I guess this is because people now are very active in the internet compared to 2 to 3 years before. People are actually spreading a lot of fake news about it which I conclude to be the reason why there are so many ignorant people.

How many Americans are confirmed with coronavirus?AFAIK,there are 230 confirmed cases.Is this a lot?No.

Not a lot but the fact that the virus is airborne is scary. Imagine having 200 cases but spreads in no time, like doubled every day or in a week.

How can lower interest rates help for fighting COVID-19 or lowering the panic across the financial markets?
How can Fed help with this?I have no idea....
This makes me wonder about all the conspiracy theories that COVID-19 is created by someone in order to spread some panic and manipulate the world economy and financial markets.This hypothesis will never be proved with any evidence.

Feds are doing this to fight cryptocurrency. There is no reason why they did this, but in line with cryptocurrency.

[carter34]

Usually if there is cut down in interest rate, it should mean that the government is looking to attract more investors because people will come borrowing. Is that same as in this situation that corona virus epidemic is cutting off lives. I'm trying to relate the cut down to the health issue at hand.

[bitgolden]

I don't get why there is a centralized organization that needs to take care of the economy of a nation when the companies should have been responsible for themselves.

I understand that governments wants to make sure their companies do not bankrupt but when it comes to capitalism and the very rich they are very happy to talk about how bad socialism and how great capitalism and free market is, if the free market and capitalism is such a great thing, let these companies take care of themselves and get out of debt and make more profits, if you are suggesting the helping out to billions of dollars worth of companies are a good thing, why not do the same for people who are literally dying because they can't afford to go to a doctor for their sickness or buy their medicine.

What this interest rate cut tells me that for the top of america it is socialism, for the bottom of america it is capitalism, nothing more or nothing less, those companies will churn out billions in profits and just keep taking in help that government took from poor.

[maye5104]

I don't know whether it is a Coronavirus pandemic influence or not, but Bitcoin is loosing its previous positions too. And gold price is on the rise at the moment. Although, there was an opinion that gold lost its safe-haven status several days or maybe even weeks ago. When the U.S. dollar deposits see negative rates, smart money is likely to move not into commodities.

[abhiseshakana]

I don't get why there is a centralized organization that needs to take care of the economy of a nation when the companies should have been responsible for themselves.

The answer is very simple if they do not regulate then the profits of the capitalists will be reduced or even lost. We need to understand that Wall Street is not a New York stock exchange. So the IMF is not Wall Street, and America is not a Wall Street, not an IMF. America as a state can control the IMF but America cannot control Wall Street and even the tendency for Wall Street to influence the American government.

For example, a country that is given a good rating by an IMF institution through moody or S&P may not necessarily get a good rating from Wall Street through an assessment from Goldman Sach or Merill Lynch that could lower the investment grade of a country, and unfortunately, private investors trust the Wall Street valuation more than the IMF.

The purpose of reducing interest rates is to roll back the economy, especially labor remains absorbed, if the economy does not rotate then there is no profit. In addition, the capitalists plan to make a grand strategy change, that is, before the world was made dependent on fossil oil, now they plan to master renewable technologies and minerals such as nickel and lithium and other rare minerals.

[Leonardo7]

I hope the Federal reserve bank won't eventually lead a campaign that will collapse the reign of fiat by their calculated character to pump in more money and in turn print more money. The fight against the epidemic is more important for now.

[awik p]

I hope the Federal reserve bank won't eventually lead a campaign that will collapse the reign of fiat by their calculated character to pump in more money and in turn print more money. The fight against the epidemic is more important for now.

right, the fight against the corona pandemic is now more important, the humanitarian sector is preferred. and this is done by all countries. so do not be surprised if the economy of almost all countries experienced a downturn. by cutting bank interest, it will lighten the economy basically