As Bitcoin Price Volatility Hits 2019 Low, Federal Reserve Tests Pivot That Could Benefit Emerging Markets
Bitcoin is currently trading upwards of $3,435, down 3% week-over-week, amidst a broader, ongoing crypto market sell-off. According to BitMEX’s volatility index, Bitcoin’s rolling 30-day annualized volatility rate is at its lowest point this year, at 43% compared to 49% last week.
While analysts see low volatility as a sign of a major movement in either direction, Bitcoin’s price under $4,000 has spurred interest in the word’s leading digital asset, according to TD Ameritrade’s Trader Business Strategy Manager Shawn Cruz.
Meanwhile, investors are trying to decipher broader traditional market trends following the recent meeting by the Federal Reserve. The question is whether Bitcoin can be become a significant hedge against the US dollar as the economic landscape for emerging markets continues to change.
In a rather abrupt shift in strategy, the Fed has decided to hold off on comprehensive quantitative tightening, citing the uncertainty in the global markets as a major factor in their decision to wait.
Quantitative tightening is the reversal of quantitative easing, the strategy by which the US and other global superpowers have pumped an additional $12 trillion in freshly printed money into global financial markets. The tightening is done to prevent runaway inflation after years of quantitative easing has flooded the markets with cheaply printed USD.
However, the Fed isn’t ready to tighten the money supply just yet, and announced their decision to hold interest rates steady on Wednesday, during the corporation’s latest two-day policy meeting.
Says Fed Chairman Jerome Powell says,
“The situation now calls for patience.”
On Thursday, Chief Investment Officer at Plurimi Wealth Management, Patrick Armstrong, and ING Head of Global Strategy, Chris Turner, sat down with Bloomberg to offer their analysis as to why the Federal Reserve has suddenly changed its tune.
Armstrong noted the recent government shutdown and souring US trade relations with China as potentially destabilizing factors to the US economy, among other factors that have contributed to the Fed’s decision not to raise rates.
On growing the money supply, Armstrong says,
“Inflation pressures are going to surprise.”
Ultimately Armstrong says the current conditions and the Fed’s shift in policy are a gift to emerging markets. Low interest rates and market volatility spell massive potential short-term gain for emerging economies, but could lack sustainability in the long run.
ING’s Turner, who noted a general air of volatility in the global markets, commends the Fed’s caution.
“The risk management approach is probably right. Why put yourself out there needing to take rates higher when the global environment is quite uncertain?”
ING Bank, as an adopter of blockchain technology, just inked a five-year licensing deal with R3’s enterprise blockchain platform Corda Enterprise.