Today, after Jerome Powell at the Fed announced yet another rate cut in response to stock market chaos, Bitcoin is down toward the $8700 mark.
Some think that proves that Bitcoin is likely to be a flop in the long run. Cointelegraph reports today cite remarks by Peter Schiff, a noted gold bug and Bitcoin hater, talking about how Bitcoin should have rallied on the rate cut as a safe harbor investment.
“If Bitcoin won’t go up, why own it? The answer to that question is ‘sell.’ Look out below!” William Suberg quotes Schiff as saying.
But is Bitcoin really supposed to gain from actions like this at the Federal Reserve?
An opposing case to be made is that Bitcoin would logically drop because of the economic juice that a rate cut provides. The rate cuts are designed to promote short-term economic activity in the dollar world.
Here’s what Omkar Godbole at Coindesk had to say in response to another rate cut last September:
“Rate cuts are inflationary in nature, meaning they reduce the purchasing power of fiat currencies,” Godbole wrote. “Hence, there is a general consensus in the crypto market that Federal Reserve’s monetary easing will bode well for Bitcoin, which is deflationary in nature and is set to undergo a mining reward halving … in less than a year.”
As for noted BTC fan Anthony “The Pomp” Pompliano, a brand new letter to investors shows Pompliano is bullish about how the rate cut will affect Bitcoin in the future.
“Central banks only have two tools when we near recessionary periods — cut interest rates and print money. As I wrote last July, these forms of monetary stimulus are very positive for Bitcoin,” he writes. “The rate cuts and subsequent money printing is going to occur within months of the Bitcoin halving. So while the fiat currency world is accelerating the devaluation of their base unit of account, Bitcoin will be programmatically increasing the scarcity and value of their base unit of account.”
Stay tuned.