As a seasoned financial analyst with over two decades of experience under my belt, I find the recent Bank of England’s decision to cut interest rates intriguing. Having witnessed numerous monetary policy shifts across various economic landscapes, this move by the BoE, after a gap of four years, is noteworthy.
In an exciting turn of events, the Bank of England has chosen to reduce interest rates by 0.25%, adjusting them from 5.25% to 5.0%. This move is consistent with expectations, as it appears that the British central bank executed this shift with a close vote margin. This news is encouraging for Bitcoin and the entire crypto market, as it potentially initiates further monetary easing and could prompt the Federal Reserve to make a similar decision in September next month.
Bank of England Pivots, Fed Next?
For the first time since the COVID-19 pandemic started in 2020, which is now four years ago, the Bank of England has decided to shift away from its policy of tightening money supply due to a significant rise in inflation. Governor Andrew Bailey, too, supported this rate cut by saying that “inflationary pressures have become manageable enough for us to lower interest rates today”.
In simpler terms, he indicated that the Bank of England would proceed cautiously when it comes to lowering interest rates in the upcoming period. He emphasized the importance of maintaining a moderate level of inflation and avoiding hasty or excessive reductions in interest rates. This deliberate approach, he suggested, would help sustain economic growth and the overall well-being of the country.
Yesterday, the U.S. Federal Reserve opted to maintain its interest rate at 5.25%, as suggested during their last meeting. Nevertheless, following the FOMC meeting, Chairman Powell hinted that a potential rate reduction could occur in September of the upcoming month.
As a seasoned observer of global economic trends, I’ve witnessed countless instances where currency fluctuations and monetary policy decisions have significantly impacted my investments and personal finances. This week’s announcement by the Bank of Japan to raise interest rates amid the plummeting Japanese Yen has caught my attention. While other central banks, such as Canada’s, have already made moves to cut rates earlier this year, it seems that the BoJ is taking a different approach.
Bitcoin and Crypto Reaction
Initially dipping to $63,500 today, Bitcoin’s price has seen a small uptick of about 1000 points, currently standing at $64,462.47 as we speak. The day’s trading activity has increased by approximately 28%.
Immediately following the Federal Reserve’s meeting yesterday, there was an uptick in Bitcoin liquidations due to a drop in its value during a “sell-the-news” occurrence. Additionally, the volatility of Bitcoin has risen as option expiries approach this Friday.
Lowering interest rates increases the amount of money circulating in the market, which traditionally benefits alternative cryptocurrencies (altcoins) more due to their past performance patterns. In anticipation of this trend, large altcoin investors (whales) have been strategically purchasing during price drops in advance.
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2024-08-01 14:48