Will the Fed's QE program strengthen Bitcoin in one way or another?

Another huge Quantitative Easing (QE) program is expected to favor bitcoin, both in terms of reputation as a hedge against centralized changes in the financial system, and also directly, as asset prices gradually rise across the board.

The action of QE

While QE can be considered an anathema for cryptocurrencies, some experts agree that the net effect on prices is positive in one way or another. QE has helped raise the price of bitcoin (BTC) in the past ten years, according to economist and author Frances Coppola.

"What QE does is raise asset prices across the board and that would include new alternative resources like bitcoin," he said. The idea that bitcoin is related to the financial mainstream is now unquestionably confirmed, added Coppola (Lo Coronavirus shock this month saw bitcoin lose nearly 50% of its value).

Were there any other QEs?

Central banks conducted three QE cycles between 2009 and 2015, during which the S & P500 rallied over 200%. Gold, a classic safe haven asset, rose from $ 800 to $ 1,921 in the three years prior to 2011, before returning to $ 1,050 by December 2015.

Since the last financial crash in 2008, QE has helped global private wealth grow by two thirds to $ 166 trillion, according to the Boston Consulting Group, however, the idea that spending money in developed economies leads to hyperinflation – a popular idea among some bitcoin advocates – it's false, Coppola said.

“There is absolutely no evidence that QE causes hyperinflation. The way QE works is to push investors towards higher yielding assets – and bitcoin, while being incredibly volatile, has higher returns. So what you actually get are asset bubbles, including bitcoin, "he said.

Hypothesis: how cryptocurrencies will react

To counter the ongoing coronavirus pandemic, the Federal Reserve has announced a program that includes the purchase of bonds worth $ 700 billion and the reduction of interest on deposits between 0.0 and 0.25%.

Simon Peters, market analyst at eToro, has agreed that once the increase in COVID-19 cases outside of China begins to decrease, investors will look towards assets such as bitcoin.

"Having cash is not beneficial in these circumstances because the currency has been devalued and purchasing power is lost. So where do you invest? This is potentially the time when anyone who can afford to invest in bitcoin or other crypto assets can actually see the advantage. "

Meanwhile, we are thinking of cutting rates

Meanwhile, there are several factors that could require a revision of the interest rates by the Fed in the coming months. All this can be traced, like anything in this period, to the coronavirus pandemic. This could cool relations between the USA and China again, calling into question the fate of all the world economy, as we have already been witnessing in recent weeks.