Trump’s calls at negative interest rates can benefit Bitcoin, says analyst
The president of the United States has once again asked the Federal Reserve to significantly reduce interest rates. For Dan Tapiero, of DTAP Capital, such “dollar degradation” would benefit Bitcoin and other hard assets of value storage.
Tapiero believes that Trump hopes to boost economic activity by effectively charging customers to keep money in the relative security of banks or bonds before the 2020 presidential elections. However, such policies may also encourage more people to seek Alternative means to store your wealth.
Bitcoin has no negative interest rates.
When growth slows in an economy, an increasingly popular method used by Central Banks to encourage new spending is to reduce interest rates. In general, banks make interest payments to those who store cash with them. A high interest rate will encourage savings and a low should encourage spending and indebtedness, driving new economic growth.
Negative interest rates were first used after the 2008 economic crisis in Europe. In 2014, the European Central Bank cut interest rates below zero for the first time. The measure was a response to low inflation and a serious debt crisis. Since then, other Central Banks, including Denmark, Switzerland and Japan, have introduced negative rates.
Most economists predicted that Donald Trump would want lower interest rates for the 2020 presidential elections. However, today he tweeted encouraging the Federal Reserve to lower rates to less than zero:
Bitcoin investor and defender Dan Tapiero believes that the negative interest rates proposed by Trump to stimulate growth in his election campaign can directly benefit Bitcoin.
The reason behind Tapiero’s argument is that people who were content to store their wealth in a bank are encouraged to do something else with their cash. Such “degradation of the US dollar” can lead people to “alternative stores of value,” says Tapiero.
Tapiero mentions both Bitcoin and gold specifically in his Tweet. Although its position seems solid on a theoretical basis, it relies heavily on the confidence in Bitcoin that is probably still missing.
A Central Bank will generally introduce negative interest rates in response to an economy that becomes risk averse. At the moment, it seems premature for US investors to see Bitcoin as a true safe haven and begin to invest money in the digital asset in response to any impending Federal Reserve attack on interest rates.
Although Bitcoin has the necessary qualities to be considered an effective asset of value deposit, it seems far-fetched to believe that there is enough collective trust for the asset to become a viable alternative to keep money in a bank at the moment. In the eyes of the world (and rightly so), it remains a great risk asset. It offers something so radically different from any other form of money. Distrust and skepticism is natural. However, Bitcoin can overcome these obstacles simply by doing what it is doing.
It is important to remember that this is still very early in the history of Bitcoin. As long as the network continues to function as it has been doing, public confidence in the cryptocurrency will grow. As trust grows, the market capitalization of Bitcoin will increase. This will make it even more effective as a means to store value. A larger market capitalization will eventually mean that much more money is needed to move the price in the type of oscillations synonymous with today’s cryptocurrency markets.
Disclaimer: This press release is for informational purposes information does not constitute investment advice or an offer to invest. The views expressed in this article are those of the author and do not necessarily represent the views of infocoin, and should not be attributed to, Infocoin.