Bitcoin is on the news again, and this time, its value has surpassed $60 000. This was provoked by the US Federal Reserve’s decision to decrease borrowing rates, which they have not done in the four years of the COVID-19 pandemic period.
The Fed’s Move: Why Lower Rates Matter
What are the implications of the Federal Reserve lowering interest rates? Think of it this way: It could therefore be argued that the Fed is akin to a thermostat that regulates the condition of the economy. By doing so, what they’ve effectively done is reducing the amount of interest, that is, the ‘price’ of borrowings. Because it costs less money for business organization and people to borrow money in terms of fas, it makes it cheaper. Consequently, due to the improved borrowings, people as well as companies are more willing to invest, spend, and, indeed, to take risks.
Okay, here is the fun part. Cryptocurrencies such as Bitcoin are normally seen as ‘ high risk investment’ products. It’s explainable that when borrowing rates are high, people are inclined to stay away from risks. On the other hand, where the rates are low, such as 2 percent for the year, investors do not hesitate to invest in such instruments as Bitcoin.
Bitcoin’s Price Jumps: Why Now?
Following the Fed’s statement, the BTC rate rose by approximately 1% to $60,778. Although it may not be a dramatic shift, one must remember that it is the trend that matters. To help provide perspective, Bitcoin has been quite volatile in recent days – rising and falling erratically. It was only a few months ago when it reached its all-time record of nearly $74K!
It may explain why bitcoin is rising, but it is not the only aspect that the Fed has recently affected. Hedge fund manager, Anthony Scaramucci, said there is improved sentiment in the market as they receive more clarity on the regulations regarding cryptocurrencies. In other words, they are beginning to understand that Bitcoin is not some sort of reckless roll of the dice that is out of control. Somehow, this decision by the government of this country may have put Bitcoin on the right path with clearer rules guiding the way.
What Happens Next? Can Bitcoin Reach a New High?
With Bitcoin now hovering around $60,000, the question on everyone’s mind is: It will be interesting whether it could go even higher. Well, some people, including Scaramucci, do believe so. He presupposes that with the key interest rates remaining low and the regulation of Bitcoin and its peers becoming less opaque, Bitcoin has potential for yet another surge. It might even surpass its previous record which was just below $74,000.
However, it should be recalled that the price of bitcoin is highly volatile. Thus, it is always better to be prepared because, though the outlook may be good and positive, one has to watch one’s step.
Why Should You Care About Bitcoin’s Rise?
Now, you might be thinking, “I have no Bitcoin; therefore, this should not affect me.” Well, that’s a valid question to ask! Navigating the world of investing is already complicated; it just became even more complex with the presence of Bitcoin. Bitcoin has the index effect when it rises, other cryptocurrencies and even some stocks follow the trend. Moreover, with more attention given to Bitcoin and the growth of popularity of cryptocurrencies in general, you might one day pay with Bitcoin or any other cryptocurrencies.
Final Thoughts: Is Bitcoin Here to Stay?
Bitcoin rising to above $60,000 is something to talk about no doubt. The decision by the Fed to cut interest rates has obviously contributed to this given rise, but it is not the only factor. As the market forms and gets more stable, and regulations become clearer, there is all the reason for Bitcoin to scale new heights.
However, similar to everything in the financial universe, there is no certainty in the investment world. There is no certainty as to how the future will look like for Bitcoin. It may make new heights or may again decline. Either way, one thing is certain: It is for these reasons that bitcoin needs to be monitored. It is here to stay.
