A few years ago, it was believed that technology is limited to the manufacturing sector only. However, with the change and development of the same, there are ample new avenues which are highly influenced. The currency market is also not left untouched by the same as cryptocurrency is nothing but the product of technology only. It is also known as virtual currency as it is produced by technology, and no physical currency is involved.
With the global economy stagnating to a level that could cause a new recession, the world of traditional finances is weary every day. Fighting chaos in the United States two times this year, the Federal Reserve reduced interest rates at the end of the year.
While previous cuts had a little major effect on the crypto economy, an uptick in fear of the Federal Reserve failure to end the recession could lead to savings being deposited in a digital value shop.
In the wake of a one-quarter-point decrease in the federal fund benchmark by the central bank of the nation from 1.5% to 1.75%, Federal Reservation Chairman Jerome Powell stated that the rate decrease could be fully improved if optimism continues to falter.
The Chairman’s decision undoubtedly influenced conventional markets, including American stocks, as the S&P 500 grew by 0.3%. The crisis sector, however, has not responded to the news.
Bitcoin experiences high volatility at the time of writing as assets fight to maintain a stable level of support of $9,000. If the market doesn’t take Bitcoin past $10,000, it could lead to a drastic challenge for the savings and investments of many out there.
What is bitcoin?
Bitcoin is a digital currency created after the housing market crisis of January 2009. It continues after the theories of Satoshi Nakamoto in a whitepaper. The name of the person or individuals responsible for the invention is still a secret. In comparison to conventional online transfers, bitcoin provides a guarantee that the transaction rates will be cheaper than traditional ones and regulated by a decentralized authority.
No physical bitcoins are there, just balances stored on a public ledger, with clear access to all users that are checked by a huge amount of computer power along with all Bitcoin transactions.
Is cryptocurrency safe to invest in?
For about a decade, there have been some of the largest cryptocurrencies, but they have been popular only in the past few years. Crypto frenzy hit the height of growth at the end of 2017. Bitcoin’s price in mid-December came to almost $20 000, with more people buying their shares than ever before. The media interest in cryptocurrencies continued to grow in the following months, amid declining values. Stories began to surface that put their authority into question.
Even for such a brief period, the inherent instability of crypto-currencies necessarily posed doubts about their investment reliability. In the meantime, high-scale hacks and apparent associations with disastrous activity raised more general concerns about their safety. It can be difficult for those who wish to invest in cryptocurrencies to discern between sensational media coverage and genuine analysis about the state of affairs, particularly on limited scales.
Growing market challenges:
Despite the market challenges, external developments like the potential rate reduction will add fuel to Bitcoin. While some think that the entire crypto market will fail in the case of a recession because investors would not conserve their money during a period of uncertainty, others feel that the occurrence would lead to a large number of customers using Bitcoin as a shop commodity. Both effects might occur, but no clear response is possible.
The decisions taken by the conventional financial market have, according to the Ikigai Asset Management CIO Travis Kling, provided that no person dominates the whole world of cryptocurrencies. One of the fundamental problems of cryptocurrencies is decentralization since it allows all users of a blockchain network to trust one another, rather than depending on a single party that might not be the best.
Is the bull going to run in the recession times?
For the past few years, the next recession was discussed as an event that is sure to occur over the next decade. The banks’ poor control of the global economic environment turns consumers into cryptocurrency enthusiasts. If 2008 is replicated, it will accelerate the adoption of cryptocurrency as people realize that centralized institutions can no longer be trusted.
Should a contraction arise in 2020, and the incentive halfway case in Bitcoin in May 2020 should coincide perfectly. Both incidents would set Bitcoin and the entire economy, an exceptionally optimistic mood, because a large volume of money would start pouring into the economy. While the global economy is not struck by a slowdown fast, Bitcoin would also enter a bull’s edge as the cyclical business condition suggests that a price spike would possibly arise after the halfway case.
The bitcoin market, not a boring marketplace anymore:
At the beginning of the year, the Bitcoin market was almost bland, which looked unlikely because the price was up to $20,000 at the end of 2017.
Now things are different. The first quarter of the year was trapped in around 4,000 dollars but then recovered, rising to over 10,000 dollars, partially because of the U.S.-China trade war and the Facebook proposal for Libra to introduce its digital currency.
The Federal Reserve added steam to the rally as it changed its latest strong indication from the higher pace in 2018 to hold borrowing rates at a stable price. A change is planned as Wednesday marks the conclusion of a two-day conference of main officials. A more easy monetary policy could offer Bitcoin more profits.
Bitcoin has been the dominant model as a hedge against flagrant fiscal and monetary policy,” says Barron’s Matt Hougan, the global analysis manager of Bitwise Finance. “I agree; it does so.” “I hope it does.”Thomas Lee, Fundstrat Global Advisor Managing Partner, said via email that Bitcoin is influenced by macro-economic factors, especially in the US dollar. He claims that because consumers are now expecting a rate drop, it depends on whether or not Bitcoin is affected due to the dollar’s cut.
When he wrote, “Fed moves USD affect, Bitcoin impacts.” “Last year, we saw big US Dollar and bitcoin increases from the Fed.”
A keen eye on the market from experts:
Just like other market observers, Bitcoin traders will examine the Fed’s tone and forward-looking statements, Hougan said. “We are going to see a strong constructive welcoming monetary policy for Bitcoin values,” he stated. He found out that buying commodities like Bitcoin and gold that don’t yield is comparatively more appealing as prices sink.
Furthermore, fear has increased that the Fed’s strategy may be more and more politicized as President Donald Trump has sought to buckle down central bank rates. “There is also fear that President Trump may pursue ways to lower the dollar’s value as a means of stimulating the economy before the elections or that dollar strategy will be armed as an economic trademark.
Is bitcoin a vital part of the future?
The hearings this month ‘made cryptocurrencies’ traditionally look to be a vital part of the future, but also made the great value of the decentralized nature of Bitcoin quite visible, Hougan said. Politicians may have bashed Libra, Twitter, FB, he said, but “you won’t be able to call Bitcoin before Congress to provide evidence,” he said.
Hougan said that his Libra digital currency project was a long-lasting gain for Bitcoin over the two days of harsh interrogation, even though Congressional grilling put a major, short-run in the game.
The rate cuts and the market impact:
The Federal Free Market Committee announced a big adjustment to the reform strategy on Thursday. The announcement coincides with the speech of Fed President Jerome Powell at an annual Jackson Hole Economic Symposium virtual conference.
All 17 FED officials have accepted a strategy that would cause inflation to be ‘moderately higher than 2%’ for a certain amount of time. This suggests that if the unemployment rate declines, the Fed is less likely to raise interest rates, CNBC reported.
Bitcoin has always been fluctuating in terms of value but has also been a part of the investment for many. With the Fed rates, there will be a huge effect on the market, but for how long it is going to last will be a challenge for the market.