Trump is not so much a ‘Marmite’ kind of person as he is one that is just plain acidic, especially in his relations with other people. Nowhere is this more demonstrable than in the eyes of cryptocurrency investors, and their glimpse at the relationship between the US President and Jerome Powell, who serves as the Chairman of the US Federal Reserve.
Is this a wholly terrible thing? Not necessarily if you’re interested in investing in Bitcoin, for one. According to the head of Galaxy Digital LLC, and influencer in his own right – Michael Novogratz – Bitcoin is going to be one of the few assets that will actually profit in a meaningful way from this distrust and, let’s be honest, increasingly overt animosity between Trump and Powell.
The billionaire and founder went on to explain on Wednesday of this week that, it’s because of these interdepartmental tensions that he became a lot “more bullish” on the future prospects of Bitcoin. Especially after President Trump went on record as threatening the Chairman with demotion should he decide against proposals to lower the current interest rates.
These threats made by the president come just before the US Federal Reserve is due to announce its take on the matter of interest rates at 1400 on Wednesday the 18th of June (Eastern Time) in the aftermath of a two day meeting between the Reserve board.
Michael Novogratz, took to Twitter to provide his insight on Bitcoin:
@Novogratz – “Makes me more bullish $BTC”
In reply to Sara Eisen:
“Powell can’t cut rates tomorrow after the president just ‘blackmailed him’ into doing that.”
Railing Against Rates – Bitcoin
While the United States Federal Reserve has been involved in two days worth of discussions on the matter. There are economists that honestly believe that the Federal Reserve is still not likely to announce a cut to the interest rate in June, even considering the kind of weak data from the job market, and accompanying soft levels of inflation from consumer prices.
While this is looking more and more likely to be the case in June, the central bank looks better positioned for decreasing these rates in Late-July or early August.
During this same month, with economists casting uncertainty of any decrease to interest rates this month. There is an 80 percent approval rate, especially amongst traders for a proposed cut in interest rates. When it comes to the short term – the underlying sentiment among stock traders on the market is one of a bullish feeling, especially within the United States.
This is something reflected by the performance of a number of major US markets. During the June session, for example, the likes of the S&P 500 Index, the Dow Jones Industrial Average as well as the Nasdaq compositive have all seen profit increases of around 6 percent through the close of business on Tuesday.
While this is certainly a positive indicator, the month to date gains seen from Bitcoin, in contrast, are somewhat lower than those seen from the benchmark markets of the United States – having increased by 3.69 percent over the same span of time. One thing that was generally expected to push the cryptocurrency market upwards was the announcement of Facebook’s own digital currency and [pseudo] decentralized blockchain solution ‘Libra.’ However, much like in other times of good news, the general response from the crypto market remained relatively muted in comparison to bad news.
Regardless, Bitcoin’s broader movements and market sentiments appear to to be far more bullish. This is thanks to a number of destabilizing events such as the ongoing protests in Hong Kong regarding the Chinese extradition process, along with the ongoing trade war between the Chinese government and the United States and the potential that blockchain technology will be adopted by a number of mainstream institutional organizations such as Fidelity.
Walking Hand in Hand
These two interesting, yet diverse markets are converging at a crossroads, with further positive developments being supported by the US Federal Reserve. Investors, in particular, who have otherwise been involved in the conventional investment world, along with the realm of digital assets such as Bitcoin. They have been paying specific attention to this intersection, as well as having a vested interest in cuts to the existing interest rate as a hedge against any potential slowdown in economic performance.
Should this interest rate cut go ahead, the benchmark markets within the United States could see a profound boost of anywhere ranging from 21 percent following the next cut in interest rates. This is according to research conducted and published by Barclays. This same theory behind decreasing interest rates rings very true for Bitcoin, which could benefit from this same increase in buying intention, especially if borrowing within the US Dollar becomes cheaper.
While this is a state of affairs that would be very much desired from the investor’s point of view, But this is the optimistic view of investors for right now, and can only be the case if Mr Powell and the Federal Reserve decide to go ahead with a cut to interest rates in June. One of the other scenarios that is looking somewhat likely in the minds of economists is that interest rates will remain the same – resulting in the Bitcoin market being negatively hit – this is at least according to the Founder of Compound Finances, Robert Leshner.
“We’re finally starting to enter an environment of rising interest rates which crypto has never seen before and it’s going to be potentially challenging to the price of a lot of crypto assets just like it will be for a lot of assets in general, including equities.”
Long-Term Sentiments in the Market
One of the other hypothetical scenarios that could come out of this rate cut does not bode well for the US Economy – the latter of which does not look set for a soft landing, this is according to Ryan Detrick of LPL Financial.
Having gained a reputation as a highly experienced senior market strategist argued that the Federal Reserve is looking to cut interest rates during a time when the prospect of a financial recession is looming overhead with a greater risk of it happening. Detrick further stated that the previous two times that the Federal Reserve reduced interest rates were in 2001 and 2017. These ultimately resulted in the value of stocks being cut in half.
“But the reality is if you go back further in time, you can also see explosive rallies after that first cut,”
Mr. Detrick said.
At the same time, according to data accrued and published by Barclays demonstrated that during these same periods of interest cuts also saw the S&P 500 record losses of approximately 17 percent when this happened.
Bitcoin’s performance has been nothing short of impressive over the course of the year, and especially in May, where it managed to steadily creep up to, and break past the $9,000 mark. This was, in part, made possible thanks to the macro-economic backdrop of the ongoing trade war between the United States and China. This demonstrated that investors have an eye on potential hedges for their portfolio during broadly challenging times for the economy.
Among those that have since found a series correlations between Bitcoin’s positive movements and performance relative to a string of tensions on the international economic community is the US-Based Grayscale Investments organizations. It found correlations between Bitcoins positive performance and the capital controls of China, to the debt crisis in China.
The Grayscale Investments team further wrote about this in detail within its report:
“While it is still very early in Bitcoin’s life cycle as an investable asset, we have identified evidence supporting the notion that it can serve as a hedge in a global liquidity crisis, particularly those that result in subsequent currency devaluations.”
Research like this raises some hopes and optimism that Bitcoin is operating like a robust hedge for handing times of tension and instability in the global economic world.
It’s no surprise then that Mr Novogratz is far more bullish on the prospect of cryptocurrencies with this all in mind.
- Source: First Appeared Here
- Published Time: 2019-06-20 02:04:19
The views and opinions expressed in the article Distrust, not Investment, is Bullish for Bitcoin, Especially From Trump and Fed Chairman do not reflect that of 48coins, nor of its originally published source. Article does not constitute financial advice. Kindly proceed with caution and always do your own research.
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