The price of Bitcoin (BTC) jumped the most in two weeks on Monday, rising alongside U.S. stocks as the Federal Reserve and other central banks support the markets as the coronavirus spreads.
The largest cryptocurrency at market value increased 4.1% to $ 8,874 at 5:53 p.m. UTC (12:53 p.m. ET). The move followed a 14% decline last week, the hardest in three months.
Despite the conviction of some investors that bitcoin should be traded as a safe haven asset similar to gold or U.S. Treasury bonds, the cryptocurrency had recently tumbled with riskier assets like stocks. The sale was reversed as global authorities, including the Fed, the Bank of Japan, the International Monetary Fund and the World Bank, pledged to take action if necessary to help offset the lasting economic damage caused by the cancellations of travel, quarantine and factory disruption.
“Investors put their toes back in the water after last week [when] they jumped out of the pool, “said John Todaro, director of currency research at the crypto firm TradeBlock in New York. “This easy monetary policy in central banks should continue to support the markets in general, especially in risky areas like the equity markets, and this should spread to other asset classes like digital currencies, including bitcoin.
Fed Chairman Jerome Powell said in a statement on Friday that the central bank “would use our tools and act appropriately to support the economy”.
Chicago Mercantile Exchange futures market trading on the Fed benchmark interest rate shows investors now see a 100% chance of falling 0.5 percentage points next regular central bank monetary policy decision scheduled for March 18. currently set in a range between 1.5% and 1.75%.
Bank of Japan Governor Haruhiko Kuroda said on Monday that the central bank “would work to stabilize the markets and provide sufficient liquidity through market operations and asset purchases,” Reuters reported.
The heads of the International Monetary Fund and the World Bank said on Monday that their institutions were ready to provide “emergency financing, political advice and technical assistance”, with particular attention to “poor countries where health systems are are the weakest and the most vulnerable ”.
The global number of infections is approaching 90,000, according to the New York Times. The first two deaths from the epidemic have now occurred in the United States, and new cases have been officially reported in New York, Rhode Island and Florida.
Economists at the Organization for Economic Co-operation and Development said in an assessment on Monday that the contagion would likely cut global growth by 2020 by 0.5 percentage points, down from 2.9% “already weak”.
“The negative impact on confidence, the financial markets, the travel industry and the disruption of supply chains is contributing to the downward revisions,” the organization said.
The bitcoin rebound has pushed prices up 24% so far this year – significantly better than the performance of the S&P 500, which was still down 6.8% in 2020.
Some investors believe bitcoin should be used as a hedge against economic turbulence, in part because it is perceived to be immune to cycles that have emerged in traditional markets, where central banks should come to the rescue in the face of a massive sale . The idea is that printing money will fuel inflation, reducing the purchasing power of government-issued currencies like the US dollar.
The release of new bitcoins is dictated by the original programming of the 11-year-old blockchain network, and cryptocurrency speculators have set their hopes on the next “halving” expected in May – a reduction every four years 50% of the pace of new supplies.
Analysts at German bank BayernLB predicted last year that cutting it in half could push the price of bitcoin up to $ 90,000.
But traders in the nascent bitcoin options market are divided over whether prices will rise above current levels over the next six months. According to Skew, a cryptocurrency derivatives research company, options market prices suggest that bitcoin will trade above the $ 8,000 mark in late September.
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