U.S. stocks continue to reel over coronavirus-related fears, and investors are increasingly betting the Federal Reserve will slash interest rates to stabilize the economy and markets.
But whether those investors turn to bitcoin (BTC) as a crisis hedge remains to be seen.
Such action by the Fed could, in theory, help bitcoin prices since lower rates would likely reduce the appeal of income-yielding assets such as U.S. Treasury bonds, according to analysts tracking the 11-year-old cryptocurrency. So far, the Fed has not said whether it would cut rates, with Chair Jerome Powell taking a "wait and watch" attitude.
Yields on 10-year U.S. Treasury notes slid by 0.15 percentage point to a new record low of 1.14 percent, indicating heightened demand; bond prices move in the opposite direction of yields. Rates also fell on government bonds from the U.K. Those from Germany and Japan fell further into negative territory.
“As interest rates decline, you're more likely to tip the seesaw toward assets that don't have yield, such as collectible assets like artwork or gold or bitcoin,” said Greg Cipolaro, co-founder of Digital Asset Research, a New York-based cryptocurrency analysis firm.
Bitcoin prices are down 14 percent since Sunday, on track for their worst weekly performance since mid-November. The cryptocurrency slid 2.9 percent on Friday to $8,573, the lowest in a month.
Analysts and traders in the nascent market have debated whether bitcoin should trade as a hedge against malaise in traditional markets, or if it’s more vulnerable to a sell-off alongside riskier assets like stocks and emerging-market currencies when the global economic and market outlooks darken. Some investors say bitcoin is mostly uncorrelated with other asset categories, sometimes trading in sync with stocks and other times in opposition.
Bitcoin was launched by its pseudonymous creator Satoshi Nakamoto in early 2009, in the wake of the last financial crisis, so the cryptocurrency is largely untested in a market meltdown like the coronavirus-triggered panic selling now roiling stocks. Read More...