Bitcoin has been highly volatile in the past few days. However, the United Kingdom’s central bank seems to have helped tame it. The Bank of England (BoE) followed the Federal Reserve in abruptly cutting interest rates by the most since 2009.
According to a detailed report published by the Financial Times on March 11, BoE said that this move was in direct response to the economic pressure that is posed by the ongoing coronavirus outbreak.
England strives to ‘support confidence’
This publication quoted a statement as saying:
“The reduction in Bank Rate will help to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost and to improve the availability of finance.”
This move takes the BoE base rate to a mere 0.25% representing a reduction of 0.5%. Also, the Fed rate is currently set at 1.25%, with additional cuts expected later this year. After that cut, the pound reacted almost immediately; shedding 0.5% against the US dollar, but it eventually regained some of the losses.
Although Bitcoin failed to react, the crypto proponents insist that stimulating spending and borrowing by lowering these rates is one practice that will lay the foundation for the long term ruin of the fiat economy.
Governments are striving to increase spending while simultaneously applying different incentives like tax cuts for businesses to keep away from recessions, significant fear of Keynesian economists. More spending against a major backdrop of less income may only arise through the use of measures like increasing money supply, which further debases fiat currencies.
Bitcoin haven is ‘psychological’
Nevertheless, the Bitcoin’s dismal reaction to the coronavirus crisis has caught many by surprise. Among those who wonder about the ability of BTC to act as a haven asset is John Bollinger. The creator of the Bollinger Bands trading indicator on March 10 said that recent losses were unexpected. He tweeted:
“Bitcoin fell victim to the COVID-19 panic. I truly did not see that coming, I thought it might act as a safe haven asset”
In another post, he said:
“Safe-haven-ness is a matter of perception, not fact. If an asset is thought to be a safe haven, it is. The matter is entirely psychological.”
Currently, Bitcoin is trading at around $7,800 down almost 1% for the day. It had briefly surged past $8,000, but it failed to maintain the upside momentum.
