Bitcoin Rebounds on ECB Cut Looks Ahead to Fed

Cryptocurrencies had a volatile trading week. Risk appetite returned to the market with the news that US and China were defrosting their trade negotiations. The crypto world saw a correction to the downside at the beginning of the week as Bitcoin had attracted investor flows as a safe haven, so naturally it was being sold against other assets.

The European Central Bank (ECB) monetary policy decision announcement to cut the deposit rate deeper into negative territory and restart its quantitative easing (QE) program by buying 20 billion euros of bonds a month sent a strong signal that rates will remain low for longer. Crypto rose as the US dollar is softer as the U.S. Federal Reserve is heavily anticipated to follow suit next week with a 25 basis points interest rate cut.

Bitcoin traded within the 10,000 to 10,300 range this week as the ECB rate decision was the catalyst for higher price levels. The Fed has been monitoring US economic indicators and so far the picture is mixed, but with pressure from the White House and the market already pricing in a rate cut, it would be a huge disappointment if the central bank doesn’t deliver.

Lower rates around the world is driving investors to seek higher yields and returns in alternative asset classes. Interest in cryptocurrencies remains high and interest from emerging markets to avoid capital controls or currency devaluations could push the price of Bitcoin above 10,500 if the Fed follows through, and higher if there is a more dovish monetary policy decision like some members of the rate setting committee have suggested.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza