Bitcoin Steadies as Bank of England Suddenly Cuts Rates to 11-Year Low
The United Kingdom’s central bank has followed the Federal Reserve in suddenly cutting interest rates — by the most since 2009.
As various news outlets including the Financial Times reported on March 11, the Bank of England (BoE) said the move was in direct response to economic pressures posed by the ongoing coronavirus outbreak.
The UK aims to “support confidence”
The 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.”
The move takes the BoE base rate to just 0.25%, a reduction of 0.5%. The Fed rate is now 1.25%, with more cuts forecast this year.
The pound immediately reacted, shedding 0.5% against the US dollar, to subsequently recoup some of the losses.
While Bitcoin (BTC) failed to react, supporters of the cryptocurrency maintain that stimulating spending and borrowing by lowering rates is just one practice laying the foundation for the long-term ruin of the fiat economy.
To avoid recessions, a key fear of Keynesian economists, governments aim to increase spending while applying incentives such as tax cuts for businesses.
Additional spending against a backdrop of less income can only happen via the use of measures such as increasing the money supply, further debasing fiat currencies.
Bollinger: BTC safe haven is “psychological”
Nonetheless, Bitcoin’s lackluster reaction to the coronavirus crisis caught many by surprise. Among them was John Bollinger, creator of the Bollinger Bands trading indicator, who on Tuesday said that recent losses were unexpected.
“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,” he tweeted.
In another post, he added:
“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.”
BTC/USD traded at around $7,870 at press time, down 0.4% on the day after briefly rising above $8,000.