- Bitcoin closed above $8,000 this Wednesday, wiping all its Coronavirus-induced losses from mid-March.
- The cryptocurrency’s move uphill came ahead of Jerome Powell’s press conference at 1430 ET today.
- The Federal Reserve chairman is likely to discuss strategies to tame the contracting economy, with investors expecting him to keep the interest rates lower.
Bitcoin jumped above $8,000 for the first time in almost two months as investors braced for the Federal Reserve’s views on the health of the U.S. economy.
The bitcoin-to-dollar exchanged surged 5.52 percent to top at $8,180 on BitMEX, resuming its uptrend a day after correcting modestly. The pair’s move uphill wiped all the losses incurred on Black Thursday, an event on March 12 that crashed prices by more than 50 percent.
The latest hope over the slowing spread of the novel coronavirus pandemic and a decision by some U.S. states to reopen the economy supported the prevailing bitcoin mood. Meanwhile, the upside sentiment also mirrored similar moves in global equities and oil prices this Wednesday that boosted investors’ confidence in risk-on assets.
FOMC Update, Powell’s Press Conference
Gains all across the global markets came ahead of Jerome Powell’s press meeting at 1430 ET on Wednesday. Investors anticipate that the Federal Reserve chairman would give a detailed outlook on the current health of the U.S. economy, including an overview of the strategies available to the U.S. central bank to safeguard markets against the Coronavirus pandemic.
Jonas Goltermann, the senior markets economist at Capital Economics, told WSJ that Powell & team have done everything they can to shield the U.S. economy from the slowdown caused by the virus. But investors want to know about the lengths to which the Fed can go to protect the market – should the condition deteriorate.
“The communication challenge is going to be conveying that they will do more if needed, but that doesn’t mean they have to do more right now,” Mr. Goltermann added.
Bitcoin reacted positively to the Fed’s intervention so far. The cryptocurrency rebounded shortly after the central bank decided to slash interest rates to near zero, began a bond-buying program, and injected trillions of dollars into the U.S. banking system. Its upside move on Wednesday, therefore, reflected confidence.
Traders will now look for cues from Powell’s speech and Fed’s future policy direction. Easing policies could allow them to increase their exposure in the bitcoin market.
Bitcoin Halving FOMO
The likelihood of bitcoin hitting new highs are increasing also ahead of its mining reward halving in May 2020. The event will reduce the cryptocurrency’s mining rate per 10 minutes from 12.5 BTC to 6.25 BTC.
“There is a sudden panic amongst traditional fund managers to place their funds in assets that are protected against the FED printing machine,” noted Ran NeuNer, the founder of Onchain Capital. “Many have enough exposure to Gold and are now looking to Bitcoin. This is what Bitcoin was designed for and I expect an ATH this year.”
Photo by Robert Bye on Unsplash
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