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Bitcoin rose on Friday as traders refused to bow before Steven Mnuchin decided to end some of the Federal Reserve’s crisis-fighting structures.
The U.S. Secretary of the Treasury closed two programs set up to buy corporate debt, five more programs launched to lend to midsize businesses, otherwise known as the Main Street Lending Program, one facility that lent to state and local municipalities, and another that supported asset- backed securities.
Impassive Bitcoin
Such loan lines played a major role in reassuring financial markets after the global market crash in March 2020. Risky assets such as stocks have risen alongside safe havens like gold as traders anticipated two potential outcomes: that the Fed will always support the stock market and that their expansionary policy will devalue the US dollar.
Bitcoin, a young asset that swings between safe haven and risk for convenience, also surged against the Fed’s dovish approach. Between March and this month, the flagship cryptocurrency climbed to 379.21%, beating the S & P 500, gold and other traditional market rallies.
The outlook for a declining assistance program appeared bearish for Bitcoin. But its risks fell on deaf ears, at least on Friday, as the cryptocurrency climbed another 2% before the London and New York opening bell, trading above a key support level of $ 18,000.
Bitcoin is up another 2% on Friday, even against negative fundamentals. Source: BTCUSD on TradingView.com
Its rival markets were not so lucky. While gold slipped around 0.2%, futures linked to the S&P 500 index fell 0.45%, indicating a depressive opening as the US market opens.
On the other hand, the US dollar rose marginally 0.04% against the basket of major foreign currencies.
Fundamentals of compensation
Mnuchin’s decision to end the Fed’s emergency lending programs, a huge portion of which remained underutilized, came as President-elect Joe Biden gained an edge over his Republican opponent Donald Trump in the state of Georgia.
Krishna Guha, the vice president of Evercore ISI, criticized the move by the Treasury Secretary calling it a “reckless politicization of the market stabilization policy”. He noted that Mr. Mnuchin was making sure there was no more money for his successor under Mr. Biden’s regime.
Meanwhile, analysts also looked into the possibility that the Biden administration would restore lending programs after Biden was sworn in on January 20. They would need to initiate new lending facilities citing “unusual and demanding” circumstances alongside the Fed.
This somehow explains why a bearish correction in gold is also less monstrous and why Bitcoin is behaving resiliently until the end of the catalyst that helped push it to $ 18,000 in November from $ 3,858 in March.
So it looks like, the cryptocurrency expects to face a bumpy ride as it plans to retest its $ 20,000 record. Its bullish trend could resume after Biden’s oath.
