- Jerome Powell, the chairman of the Federal Reserve addressed the nation yesterday, revealing the government wouldn’t take any drastic action and would keep current mitigation measures in place.
- Bitcoin and the stock market reacted positively to the news, with the top cryptocurrency now up 4.7% to close in on the $60,000 milestone.
All eyes were on Jerome Powell, the chairman of the US Federal Reserve on Wednesday as he addressed the nation on the bank’s economic outlook. Powell revealed that the Fed would not unwind its current policies, meant to stimulate growth in the market. His remarks soothed investors, with both the Bitcoin and equities markets recording positive price movements almost immediately after.
As CNF reported yesterday, Powell’s press conference was a critical one, especially for stocks and cryptocurrencies. Over the past year, the Fed has been spurring the growth of the two markets with its easy policies. These include keeping the interest rates close to zero and buying $120 billion worth of bonds and securities monthly.
Powell took a moderate stance, revealing that the Fed isn’t ready to make any drastic changes yet.
Until we give a signal, you can assume we’re not there yet. As we approach it, well in advance, well in advance, we will give a signal that yes, we’re on a path to possibly achieve that, to consider tapering. What I’m telling you is the stance of monetary policy we have today, we think is appropriate.
Treasury yield falls, stocks and Bitcoin rise
The Fed updated its gross domestic product growth prediction to 6.5% for the year, the fastest growth since the 1980s. In an even more important announcement, he revealed that the Fed wouldn’t increase interest rates, at least not before 2023.
The market climbed over its latest wall of worry and shifted focus away from long rates, as the Fed is fine with inflation running hot and is committed to keeping short rates at zero until late 2023 (or beyond). Which of course we already knew ¯_(ツ)_/¯
— Alex Krüger (@krugermacro) March 18, 2021
The effect was a drop in both the 10-year and the 30-year Treasury yields. The former had hit its highest level since January last year at 1.689% but dropped immediately Powell announced the moderate measures.
As CNF reported, Bitcoin and stocks, both seen as riskier assets, move in the opposite direction to the yield on the Treasury notes. The higher the yield on the notes, the more investors sell off the risky assets and invest in them. Additionally, more investors were seeking alternative assets like Bitcoin as they sold off their USD holdings.
#Gold and #Bitcoin jump as Fed projects near-zero interest rates at least through 2023, sinking the dollar and boosting demand for alternative assets. pic.twitter.com/l9S1lq5JhI
— Holger Zschaepitz (@Schuldensuehner) March 17, 2021
Bitcoin has since then shot up by 4.7% and is now trading at $58,505, up from $54,620 before Powell addressed the nation. Stocks noted a rise as well, with the Dow Jones Industrial Average closing above 33,000 for the first time ever.
More good news
However, for Bitcoin, there was more good news. New reports emerged yesterday that Morgan Stanley had launched three funds allowing their clients to purchase Bitcoin. The funds will be available to clients of their wealth management division, which has over $4 trillion under management. The bank availed the funds in partnership with Galaxy Digital and NYDIG, which it invested in recently. It has now become the first US bank to offer a Bitcoin fund.
In addition, Morgan Stanley published a report stating that Bitcoin had matured as an “investable asset class.” It recommended its clients to invest in Bitcoin as a way to diversify their portfolio, urging them to keep their exposure below 2.5%.
BREAKING: Morgan Stanley, the largest US brokerage, is embracing Bitcoin.
They have released a report “The Case for Cryptocurrency as an investable asset class in a diversified portfolio."
Bitcoin is inevitable.
— Pomp ? (@APompliano) March 17, 2021
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In more good news, Chinese tech firm Meitu revealed it had purchased $49 million worth of Bitcoin and Ethereum. The mobile app maker has now doubled its exposure to cryptocurrencies to $90 million.