An eToro analyst and cryptocurrency expert has described the potential impact of the Federal Reserve’s QE on bitcoin, Coin Rivet reported.
On Monday the Federal Reserve announced a plan to unleash “unlimited quantitative easing” to boost the US economy after its coronavirus-related plunge.
Understandably, this had a huge impact on all global markets, with the S&P500 rallying by 7.75% from a low of 2169.5.
Bitcoin also experienced a boost at the hands of the Federal Reserve as it surged significantly on Monday with continuation going into Tuesday.
“Bitcoin rose by 11% yesterday, currently at around $6,700, following the US Federal Reserve’s announcement on unlimited QE to help reduce the economic impact of the Covid-19 pandemic.” said Simon Peters.
“This effectively pumps billions of dollars into the market, so some investors may be wary that the dollar will lose its value, and are moving back into bitcoin to hedge against inflation. Cryptoassets have been used in a similar way in other economies plagued by hyperinflation, such as Venezuela and Argentina.
“Because the amount of new bitcoin that comes on to the market decreases over time, it is by design a deflationary asset when compared with a fiat currency like the US dollar. In theory the value per bitcoin should increase over time.
“Following its previous falls, the price of bitcoin has been tested and held above the $5,800-$6,000 mark on a number of occasions over the last week, so we could get back to $7,000 in the coming days. However, we’ll have to see if the markets have enough momentum to break and importantly stay above this level, or whether there is a further price retreat.”
Coin Rivet’s daily price analysis also pointed out that Bitcoin was approaching a critical level of resistance at $6,800, with a breakout opening the doors for a move above $7,000.