- Before the Fed’s two-day policy meeting, Bitcoin rose above $11,000.
- U.S. monetary policymakers will decide whether to maintain the benchmark interest rate close to zero.
- The market generally reached a consensus, pointing out that the Fed will most likely not make any changes to its current easing plan.
- In the short term, this news can help Bitcoin continue its bull market.
Bitcoin staged a surprising bull market earlier this week, surpassing $11,000 for the first time in nearly 11 months.
This climb brought Bitcoin to an astonishing price of up to $11,500. However, as traders waited for the Fed to announce whether to continue its easing plan, the market subsequently entered a small downward correction.
The United States has a high probability of maintaining near-zero interest rates
In retrospect, the US Federal Open Market Committee will hold policy meetings on Tuesday and Wednesday. The committee will discuss the increasing number of COVID cases in the United States and how it threatens the recovery of the US economy in the coming months.
The grim outlook will increase the possibility that the Fed will take additional measures to appease investors. The Fed may maintain interest rates close to zero until the economy shows signs of a sustainable recovery. At the same time, the Fed will continue its bond purchase program at the price of U.S. dollars.
This year’s weakness in the U.S. dollar has led to Bitcoin’s rise because it makes the cryptocurrency relatively cheap in the international market.
Before the Fed meeting, the US dollar index rose slightly by 0.2%, but it is still trading near a two-year low.
As for interest rates, the decision to maintain a low level will directly affect major U.S. Treasury bonds. Any dovish policy will maintain additional downward pressure on actual yields. Later last week, interest rates fell below zero, prompting investors to seek higher returns on risky assets.
This also helped gold climb to a record high early this week. On the other hand, Bitcoin broke through the resistance range, which has restricted its upward movement for more than a year.
More support is coming (Bullish Bitcoin)
Lou Crandall of Wrightson Icecap told the Financial Times that he wants the Fed to keep interest rates unchanged. The analyst pointed out that the central bank is still weighing the economic impact of the COVID recovery.
He said: “In other words, we do not rule out that the Fed is ready to suggest that once the autumn framework review is over, it will shift its (quantitative easing) purchases to a longer period.”
Thomas Custer, a senior US economist at Pictet Wealth Management, pointed out that the Fed’s tendency to “hold the trigger point” will stimulate demand for safe-haven assets such as gold. In turn, this will give Bitcoin more room for growth.
At the time of writing, according to the QKL123 market, the BTC trading price was US$10,896, a decrease of 2.5%. The trading price of ETH was US$315, a decrease of 2.59%. In this bull market, ETH rose with Defi, and then BTC rose with ETH. However, after Bitcoin’s surge this week, it seems that it has begun to suck blood in the altcoin market, and ETH has failed to break through for two consecutive days. If ETH goes sideways, can BTC continue its independent market?