Prices of Bitcoin (BTC) took a beating Tuesday after the US central bank announced an emergency reduction in interest rates to cushion the risks to the US economy caused by the coronavirus.
The crypto clearly reacted to the Federal Reserve's latest move. As a result of a wave of excitement, investors pumped the digital currency more than 1.5 percent in just a few minutes along with traditional stocks and precious metals. Overall, bitcoin is trending downward, retreating from a 24-hour peak of $8,974 and currently in the red at 1.92 percent.
However, bitcoin's price ascent was temporary, as is the nature of the electronic asset. The world's most sought-after virtual money quickly retraced its surprise rally and hit an intraday low $8,677. Notably, the Dow Jones Industrial Average, the premier US stock market index likewise fell in the red zone following the Fed's rate decision.
The Federal Reserve, spearheaded by chief, Jerome Powell, trimmed down its benchmark short-term rate by 0.5 percentage point to a range between 1-1.25 percent. The central bank's financial policy body had not been set to carry out its next move on interest rates until around the middle of this month. This marks the first emergency interest rate reduction since the 2008 financial turmoil.
While the digital currency is viewed as an uncorrelated asset that does not care about US economic policy, Morgan Creek Digital's Anthony Pompliano described the Fed's rate cuts as "rocket fuel" for Bitcoin when the central bank slashed its interest rates by 25 basis points in September 2019, but the popular crypto did not budge on the news back then.
As this developed, US President Donald Trump called for more monetary easing and reductions, which Pompliano downplays as "money printing." Bitcoin has so far fallen short in reaching the $9,000 mark, after numerous attempts.
On March 3, the top virtual currency faltered in hitting this target, registering an intraday high of $8,921. For entrepreneur Alistair Milne, he believes that bitcoin could soar above the said level due to a bullish formation.
Despite a belief among some capitalists that bitcoin should be traded as a safe-haven asset just like the yellow metal gold or US Treasury bonds, the digital currency's price had weakened recently along with more volatile assets like stocks as traders rush to the comfort of cash.
Meanwhile, economists at the Organization of Economic Cooperation and Development on Monday said that the coronavirus dilemma likely will wipeout 0.5 percentage point off of the estimated 2020 global growth, from an "already sluggish" 2.9 percent.
