On June 19, 2019, the Federal Reserve, the central banking system of the U.S., confirmed that it would be maintaining the current benchmark for U.S. interest rates - which falls within the 2.25-2.5% range. According to crypto research analysts, the Fed’s recent decision regarding the U.S. monetary policy may have indirectly affected the Bitcoin (BTC) price.
As Bitcoinist reported, financial analysts had pointed out that the Federal Open Market Committee (FOMC) had made several modifications to its policy statement. One of the key changes made included replacing the word “patient” with policy statements that aim to “closely monitor the implications of incoming information for the economic outlook.”
Fed’s Monetary Policy Decisions Affecting BTC Price?
Some believe that the change in language in the Fed’s latest policy statement may be partially attributed to various geopolitical risks and increasing global inflation. Due to seemingly greater political and economic uncertainty throughout the world, the Fed might get pressured into slashing U.S. interest rates.
American. investors are now anticipating that the Federal Reserve will be lowering interest rates as early as next month (July 2019). This, analysts have argued, will directly put pressure on the USD, the world’s most stable and dominant fiat currency.
Lower U.S. Interest Rates, Higher BTC Price?
Analysts including CNN’s Paul La Monica think that reducing U.S. interest rates could potentially result in higher market rates for the gold bullion and also potentially a significantly higher Bitcoin price. La Monico wrote:
[Cutting U.S. interest rates] has been viewed as a positive for bitcoin as well as gold, which are looked at as alternative currencies [or stores of value] that should rally when central banks take actions that reduce the value of government-backed currencies.
As noted by La Monica, Federal Reserve Chair Jerome Powell and Mark Carney, the Governor of the Bank of England, recommended that the world’s central banks take an unbiased look at bitcoin and other decentralized, blockchain-based currencies.
Cryptocurrencies Must Be “Subjected to Highest Standard of Regulations”
However, Carney also emphasized (during a conference in Portugal) that all working financial products tend to “become instantly systemic.” This, according to Carney, means that cryptocurrencies must be “subjected to the highest standard of regulations.”
While authorities throughout the world work on developing a comprehensive crypto regulatory framework, the Fed has cautioned that “uncertainty” due to various political and socioeconomic factors may lead to a shift of investments to alternative assets.
These critical events include Brexit, the U.S./China trade war, recent demonstrations in Hong Kong, and overall increasing tensions in the Middle East. It’s possible that such events might lead to a larger inflow of capital into gold and potentially cryptoasset invesments.