The US central bank, the Fed, has cut the key interest rate down to between 0.00 and 0.25 percent and announced further measures. A well-known Bitcoin (BTC) expert is certain that this policy will eventually lead to a new BTC all-time high.
Recent developments in the Bitcoin (BTC) market have certainly clouded the mood of many investors. After all, the BTC price is slowly approaching the lows of the 2018 bear market again, currently at less than USD 5,000, but there is also a glimmer of hope at the end of the tunnel.
Federal Reserve taking extreme measures
The world finally entered an era without real interest last weekend. While the European Central Bank (ECB) has already set a key interest rate to 0.00 per cent in 2016, its US equivalent, the Federal Reserve (Fed for short), had temporarily raised interest rates to over two per cent again.
On Sunday, however, the Fed cut the key rate to a historically low range of 0.00 to 0.25 per cent. Such measures are often taken in times of crisis to keep the economy running, but it is highly questionable whether this will have any effect this time.
Not only is the situation caused by the coronavirus worse than in a "normal" crisis, but there has also been little room for improvement. By comparison, in 2006, before the last financial crisis, the Fed's key rate was 5.25 percent.
Accordingly, the Fed has again announced "quantitative easing" (QE), the large-scale buying of bonds with fiat money. This program is expected to be worth 700 billion US dollars, more than ever before. Will this mean that the fiat currency, the dollar, will soon be finally devalued and discredited?
Winklevoss and Adam Back: Bitcoin (BTC) will benefit!
Two Bitcoin veterans, who have seen prices drop on many occasions, are very bullish about the future. Tyler Winklevoss, BTC investor since 2013 and CEO of Exchange Gemini, wrote this weekend:
"Bitcoin was born in 2008 during the winter of our financial troubles. He has come a long way to be here and it seems unlikely that he will give up in the near future. He will emerge from this current catastrophe stronger than ever before. Decades are not measured in days."
Adam Back, CEO of Bitcoin developer company Blockstream, responded yesterday to one of Winklevoss' tweets with an even more optimistic forecast. He said that central bank policies would not only take Bitcoin to a new all-time high, but would devalue fiat currencies to the point where the BTC price would be better expressed in gold or inflation-adjusted purchasing power in the future:
"The Covid-related defensive, unlimited QE environment of the market and the possible shift to full MMT-style [Modern Money Theory] money printing will take Bitcoin to an all-time high, if by nothing else then as an inflation protection. Time to start pricing in gold or to start adjusting the purchasing power index to real inflation."
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