In a final attempt to support the declining economy, the US Federal Reserve has unveiled plans to buy “unwanted” bonds – much riskier investments. Commentators argue that even if it could argue in favor of Bitcoin, it could threaten its price.
The US Fed has extended its stimulus efforts, adding $ 2.3 trillion in economic support to provide “relief and stability,” said President Jerome Powell.
This includes provisions for small and medium businesses in the form of a $ 600 billion loan fund as well as the purchase of $ 500 billion of short-term tickets from states, counties and cities across the country. .
However, the real boost is the commitment to buy “unwanted” bonds, allegedly because of their issuer’s propensity to default. The Fed’s provision is intended to serve as a liferaft for businesses downgraded as a result of the economic implosion.
According to Charles Bovaird, vice president of content at Quantum Economics, this “unprecedented” decision could play directly into the hands of Bitcoin and its propagators.
“The Fed’s decision to buy junk bonds and help support the so-called fallen angels is unprecedented,” said Bovaird. Decipher. “In addition, this could easily be interpreted as a measure to support the non-investment grade bonds of companies trading in fundamentally inflated values.”
Bovaird argues that the Fed’s perceived excessive reach could further undermine confidence in the financial system.
“A major impetus for the creation of Bitcoin has been the development of a new economic system that can operate independently of banks and government,” he said, “Many people do not trust either, and the Great Financial Crisis gave them a particularly good reason to be suspicious. “
On a similar line, Mati Greenspan, founder of Quantum Economics, spoke of the swelling Fed balance sheet, tweeting: “The most worrying part is the decision to start buying unwanted bonds on the market. The death of capitalism is complete. “
The economist and co-founder of Real Vision Group, Raoul Pal, also highlighted a correlation between aggressive tax stimuli and the use of Bitcoin.
“The more extreme the monetary action on a global scale, the more convincing the arguments in favor of Bitcoin over time.” Pal explained to Decrypt. “ There is probably much more to come from central banks in the next 12 months. “
However, Pal returned to Bitcoin’s near relationship to mainstream markets, pointing out that continued correlation could cause problems.
“The key question is whether the market liquidation phase is over. Otherwise, Bitcoin may well be in the short term,” he warned.
While the Fed’s latest efforts to revive the economy may boost Bitcoin’s logic, there may be another benefit to aggressive tactics. As new aids are introduced and larger markets rebound in the short term, the excess stimulus could spill over to the crypto markets.
As Marcus Swanepoel of Luno said in a previous interview with Decrypt, “Any kind of stimulation is more money in the system.”
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