Bank of England’s Rate Cut Helping UK and European Stocks, but Not Bitcoin

Siamak Masnavi

On Wednesday (March 11), the Bank of England (BoE) -- the UK's central bank -- announced that it had cut its base rate to just 0.25% as part of a set of measure designed to "respond to the economic shock from Covid-19."

The BoE's announcement started by explaining the motivation behind these measures:

"Following the spread of Covid-19, risky asset and commodity prices have fallen sharply, and government bond yields reached all-time lows, consistent with a marked deterioration in risk appetite and in the outlooks for global and UK growth. Indicators of financial market uncertainty have reached extreme levels.

"Although the magnitude of the economic shock from Covid-19 is highly uncertain, activity is likely to weaken materially in the United Kingdom over the coming months.

"Temporary, but significant, disruptions to supply chains and weaker activity could challenge cash flows and increase demand for short-term credit from households and for working capital from companies. Such issues are likely to be most acute for smaller businesses.  This economic shock will affect both demand and supply in the economy."

So, the BoE had a special meeting last night, where the Monetary Policy Committee (MPC) "voted unanimously to reduce Bank Rate by 50 basis points to 0.25%." The Bank Rate (aka "Bank of England base rate") is "the rate the Bank of England charges other banks and other lenders when they borrow money."

Although Asian stock market indices such as Hong Kong's Hang Seng Index , Shanghai Composite Index, Japan's Nikkei 225 fell today (0.63%, 0.94%, and 2.27% respectively), UK and European stock market indices are almost all higher today (the main exception being Spain's IBEX 35 index).

The BoE's emergency rate cut seems to have helped both the UK and the European stock markets due to the increasing confidence among traders that governments around the world are beginning to understand that they need to act quickly and decisively to reduce the economic impacts of COVID-19.

As macro-economist and crypto analyst Alex Krüger pointed out earlier today, the next two central banks that are expected to announce interest rate cuts are the European Central Bank (ECB) and the Federal Reserve (aka "the Fed"):

Yesterday, Ursula von der Leyen, the President of the European Commission, said that the European Union needed to "act very decisively and collectively" to control the spread of the SARS-CoV-2 coronavirus and to "counter the economic fallout":

However, so far, the crypto markets do not seem to be too impressed, with Bitcoin currently down 3% (in the past 24-hour period):

BTC-USD 24 Hour Chart on 11 Mar 2020.png

In fact, according to data from CryptoCompare, currently (as of 11:15 UTC) 18 out of the top 20 cryptoassets (by market cap) are in the red, with the exceptions being stablecoin USDT and exchange token LEO.

Crypto startup Santiment, which provides "a behavior analytics platform for cryptocurrencies", said last week (on March 6) that it was seeing an inverse correlation between mentions of "coronavirus" on social media platforms and the price of Bitcoin:

Crypto analyst Krüger says that we should not be shocked even if the price Bitcoin drops 20% in one hour in times of panic like this since "large whales" may decide that they need to liquidate their Bitcoin holdings:

 

Featured Image by "stux" via Pixabay.com

Luxury Cars and $15 Million in Crypto Seized in Chinese Arbitrage Scam Bust

Michael LaVere
  • Chinese authorities seized $15M in crypto and several supercars following scam ring bust.
  • The group was allegedly operating an arbitrage scam that promised users fake Huobi Tokens. 

Chinese authorities have reportedly seized more than $15 million in crypto-assets and $2 million in supercars after busting up an arbitrage scam selling counterfeit tokens. 

According to a report by China’s Ministry of Public Security, police in the city of Wenzhou arrested 10 individuals connected to operating a fraudulent cryptocurrency scheme. The report claims the arbitrage group was scamming victims using blockchain smart contracts to generate fake cryptocurrencies. 

Following the bust, authorities seized bitcoin, ether, and tether worth over 100 million yuan ($15 million). The report also claims police seized several supercars, including a Ferrari and a McLaren valued at more than $2 million, in addition to the luxury villa in which the scammers were staying. 

The arrested individuals had reportedly operated a smart contract scheme since 2019, which advertised a blockchain product that claimed to generate Huobi’s native token HT. Unsuspecting consumers were promised the tokens would generate arbitrage opportunities worth a return of up to 8%. 

One victim, identified as Li in the report, first notified police after joining a Telegram group belonging to the scam artists. 

Li told authorities, 

Simply put, you send one unit of ETH to a designated address, you will receive 60 HT. And then you can sell it to gain the difference.

Featured Image Credit: Photo via Pixabay.com