Global markets have been in a proverbial bloodbath over the past couple of days. Gold, which had defied the downtrend for a few days, has also joined in the sell-off. The markets appear to be responding to the potential of the coronavirus to upend the global economy. The growing number of new cases being reported around the world has clearly spooked investors.
Now, the Federal Reserve is contemplating cutting rates as soon as possible in order to get some kind of stability in the markets.
Bullish For Bitcoin: Coronavirus-Driven Rate Cuts Are Coming
As the coronavirus rout continues whipsawing stock markets, Federal Reserve chairman Jerome Powell effectively hinted on Friday that the central bank is willing to slash interest rates. While admitting that the coronavirus crisis has the potential to jeopardize the economy, he maintained that the US economy is still robust.
Jerome noted that the Fed is closely monitoring the coronavirus developments and would not hesitate to use all the available tools to buffer the economy from collapse. Now many believe rate cuts are imminent.
After nose-diving this week, crypto investors are anxious to see if the crypto markets will recover or continue on a downward spiral next week and what the potential catalysts for a move in either direction will be.
Theoretically, rate cuts are supposed to be bullish for crypto because a rate cut would imply that the economy is weak. Bitcoin would be poised to benefit from global economic weakness because it is viewed as an uncorrelated asset. Moreover, liquidity injections culminate in increased inflation. Bitcoin has already proven itself as a great hedge against inflation in countries like Venezuela. Thus, a possible rate cut could be fuel for the crypto-asset.
Crypto Remains The Best Hedge
Roughly two weeks ago, global markets were smashing new highs as bitcoin traded comfortably above $10k. This week, however, the markets have witnessed the steepest correction in a decade. For perspective, at least $6 trillion was wiped off, making this the worst week for the stock market since the 2008 global financial crisis.
While crypto has been touted as a hedge against global turmoil in the past, this week has proven otherwise. Bitcoin tumbled below $9K and has since been slowly bleeding out.
However, according to Cardano CEO Charles Hoskinson, crypto is still the best bet. If the worst comes to the worst with the novel coronavirus, stocks will continue plunging and governments will be completely crashed. Crypto will then emerge victorious because is it resistant to such aftermaths.