American central bank is surrendering – high risk of Bitcoin Bullmarkt

The American central bank waved the white flag yesterday and surrenders to the wish of Donald Trump of more interest rates. Although the core inflation has climbed above 3 percent and the US economy looks strong, it is a good time to lower interest rates, according to the central bank.

Bitcoin logically responded with a huge increase, and the chance of a continuation of the bullmarkt is now significantly greater.

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Very special moment for Bitcoin and the financial markets

You can explain the speech of Jerome Powell, chairman of the US Central Bank, in two ways:

1. The US Central Bank gives up its political independence and bows for the wishes of Donald Trump.
2. They release the inflation goal of 2 percent and increase it to 3 percent. Many economists believe that a higher inflation arget may fit better with the current composition of the American economy, and that the target of 2 percent provides a too strict central bank.

Anyway, this is a development that will stimulate global liquidity – the amount of capital that is available worldwide for investments.

In principle, that is a positive development for the prices of financial assets such as shares, gold and of course Bitcoin. As a result, there is simply more capital in circulation that will look for a safe home.

In addition, more and more investors will be concerned about structural warming of inflation, making it even more attractive to opt for the natural scarcity of Bitcoin.

What should we pay attention to now?

However, there are also dangers. The American central bank can surrender to the wishes of Donald Trump, but the long interest rates are mainly the result of market behavior.

The interest rates on US government bonds with maturities of 10-30 years are the result of supply and demand. If there is less interest in that, which is a possibility with warming up inflation, then that can still squeeze economic growth.

Rentes on business loans and mortgages mainly depend on the longer interest rates. If they rise as a result, the interests on these loans that are crucial for economic growth will also increase, and that can still cause the economy to put into trouble.

Which means that the effect is exactly the opposite of the wishes that Donald Trump has. For the time being, however, we do not see that happening, which is still a positive signal for the Bitcoin course.

If the long interest rates rise and threaten the economy, the US central bank could still intervene by purchasing long -term government bonds. That can harm confidence in these instruments and is not a solution that works 100 percent, but there are possibilities.

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