The United States Federal Reserve said it would start in September.
Fed Chairman Jerome Powell said in a statement:
As we indicated in our March statement on balance sheet normalization, at some point, we will begin increasing our securities holdings to maintain an appropriate level of reserves. That is now upon us.
Treasury bill purchase Wants to feature. This opens the door for another interest rate cut – the third one of the year –
While Powell insists that the move should not be called Quantitative Easing (QE). economy during the 2008 financial crisis – one Wall Street analyst is adamant that "sure sounds like QE."
QE is essentially the introduction of new money into an economy by a central bank the purchase of government securities – Treasury bonds, bills, notes – or securities in the market.
In Australia, the economy is reportedly slowing down and consumer confidence is falling. The country is now contemplating a QE policy as well. Economists in the country are predicting that the Reserve Bank, Australia's central bank, wants to deploy QE after interest rates in the country to 0.75 percent later this month.
In Europe, the European Central Bank, or ECB, resumed QE with a bond-buying program last month.
How to QE Favors the Crypto Market
Following the Federal Reserve's announcement pending to expand its asset holdings, Bitcoin (BTC) prices jumped roughly 5.1 percent – with crypto enthusiasts saying the move is positive for crypto.
This is actually a deep point. QE was a zero sum redistribution of wealth from the people to the banks.
How the central bankers printed the currency with which to disrupt them. https://t.co/gDWDp0p9tY
– Balaji S. Srinivasan (@balajis) October 9, 2019
"I want to emphasize that in a no-way way
-Jay Powell, today
Bitcoin is an insurance policy against monetary and fiscal policy irresponsibility.
Welcome to QE4.
– Travis Kling (@ Travis_Kling) October 8, 2019
QE makes the cost of money cheaper. The problem with a lower cost of money is that it makes certain investments less attractive to investors. For instance, during low-interest rate cycles, fixed income investors move from bonds to dividend stocks into search of better yields.
In addition, returns in the stock market tend to be weaker depending on the magnitude of the interest rate cut.
So, there's the likelihood of finding new ways to hedge funds, some of which may find it's a good time to invest in crypto.
What do you think about quantitative easing and leading to increased investment in cryptocurrencies? Let us know in the comments below!
Images courtesy of Twitter, Shutterstock.