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Bitcoin had a surprising bull run earlier this week, topping $11,000 for the first time in nearly 11 months.
The climb took bitcoin to a stunning high of $11,500.However, the market then entered a small downward correction as traders waited for the Fed to announce whether it would continue its easing program.
American interest rates are likely to remain near zero
The grim outlook will increase the likelihood that the Fed will take additional steps to reassure investors.The Fed is likely to keep interest rates near zero until the economy shows signs of a sustainable recovery.At the same time, the Fed will continue its bond-buying program at the expense of the dollar to fuel the economic recovery.
The weak dollar has caused Bitcoin to rise this year.That makes the cryptocurrency relatively cheap on the international market.
The dollar index edged up 0.2% ahead of the Fed meeting, but was still trading near a nearly two-year low.
As for interest rates, the decision to keep them low will have a direct impact on Treasury bonds.Any dovish policy would keep additional downward pressure on real yields.Interest rates fell below zero late last week, prompting investors to seek higher returns on riskier assets.
That helped gold climb to an all-time high earlier in the week.Bitcoin, on the other hand, has broken out of a range of resistance that has limited its rise for more than a year.
Thomas Costerg, senior U.S. economist at Pictet Wealth Management, said the Fed’s tendency to “cling to the trigger” would fuel demand for safe-haven assets such as gold.That said, it would give bitcoin more room to grow.
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