The fear of coronavirus is currently omnipresent across the U.S. stocks. It is doubtful that investors will fall back upon bitcoin (BTC) as a crisis hedge. It is expected that Federal Reserve will lower interest rates with an eye to stagnate the economy and markets. Lowering rates can assist bitcoin because lower rates would likely reduce the appeal of income-yielding assets for example U.S. Treasury bonds. But whatever FED will do is unknown indeed.
Bond prices reportedly move in the opposite direction of yields because of heightened demand. Yields on 10-year U.S. Treasury note got slid by 0.15 percentage point to a new record low of 1.14 percent. It is thought that, you are more likely to tip the seesaw towards assets that don’t have yield as interest rates declines. But the prices of bitcoin are down 14 percent since Sunday and the cryptocurrency slid 2.9 percent on Friday to $8,573.
The observation of some investors about bitcoin is to be mostly uncorrelated with other categories and an argument between analysts and traders have whether bitcoin should trade as a hedge against malaise in traditional markets. But one fact of cryptocurrency is that it is largely untested for any kind of market meltdown.
Bitcoin halving which is expected to take place in May will cut bitcoin in half as per its nature. That automatic supply tightening differentiates bitcoin sharply from human-led monetary-policy easing by central banks. Reportedly, the cryptocurrency’s price jumped 94 percent last year and in 2020 the bitcoin is still up about 19 percent. But still bitcoin market is thought to be immature for large investors with diversified asset portfolios to use as a hedge against a financial crisis. Surrounding incidents in the world are affecting Bitcoin but whether FED cutting interest rates will bring any change remains to see.
Next Step of Fed
Italy and the World Health Organization took some necessary measures assessing the risk of coronavirus to very high from high to cut down the risk. And some other incidents including the downfall of the Standard & Poor’s 500 index are instigating investors to bet the Federal Reserve to make a move to help stanch the red ink. Fed is now more likely to cut rates by at least full percentage point by December. Central bank is monitoring all kind of situations after coronavirus outbreak. Maybe, rate cuts might prompt bigger allocations to bitcoin, yet risky because of its extremely volatility, but even then investors will have crisis mentality.