The U.S. Federal Reserve (FED) announced on March 15 that they cut interest rates to zero and launched a new quantitative easing program that would release $700 billion to the markets. This drastic response is part of the latest measures targetted at keeping the economy going and moving forward.
Meanwhile, Bitcoin (BTC) reacted with a fake breakout. As soon as the announcement was made, Bitcoin started moving towards $5,900, nonetheless, this movement didn’t last long.
U.S. FED Takes Drastic Measures but Bitcoin Falls
Bitcoin, the largest cryptocurrency in the world is now behaving like a traditional risk asset and it is being affected by financial and non-financial events in traditional markets. For example, yesterday, the FED announced that they were reducing interest rates to almost zero and starting a massive $700 billion quantitative easing program.
This is related to the Coronavirus and how it has been expanding all over the world in recent weeks. The pandemic is affecting the economy of many countries and this has suddenly become a health issue in most of the countries with the virus.
Some of the nations have decided to start a lockdown of their communities. Schools are closed, companies that are able to do so are working from home, while many manufacturing companies are already stopping their production. Additionally, some firms are already lying off employees due to reduced and falling economic activity.
In the last 24 hours, cryptocurrencies have been falling and are close to their lowest point in years. While Bitcoin fell by 5.21% below $5,000, Ethereum (ETH) is now being traded around 8.73% down with a market capitalization of $12.47 billion. In addition to it, XRP is being traded around $0.143 and it has a market cap of $6.29 billion.
The same happened to other digital assets in the space such as Bitcoin Cash (BCH), Litecoin (LTC) or EOS. It seems that the markets are now affecting Bitcoin and the entire crypto market. Indeed, in the past, Bitcoin may have not been affected by changes in the financial markets, but things are different when a world financial crisis seems to be getting closer.
The main question is what will happen in the coming weeks. It all will depend on how countries are able to minimize the effects of the Coronavirus on the economy and whether investors will trust digital assets again.