The Coronavirus has kept the global economy immobile for quite some time. People are out of work, economic activities have stopped and companies have been forced to close down. The Federal Reserve has pushed to provide more new money for people and businesses in the hope of putting the economy on hold. If the economy doesn’t recover quickly, what’s next for the Fed, and, importantly for us, what about Bitcoin?

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How can the Fed boost Bitcoin?
The COVID-19 measures caused the U.S. unemployment rate to jump to 13%, and more than 16 million Americans have already filed for unemployment benefits. To remedy the declining cash supply, the Fed has put $3 billion of new money into circulation so far this year.

However, this will only be a blessing in disguise. The increased money supply will essentially weaken the U.S. dollar, reducing purchasing power and increasing inflation.

In addition, the Federal Reserve’s money printing exercise (quantitative easing) may boost the price of Bitcoin as more investors want to hedge against inflation. BTCUSD has risen 44% since March 23rd when the Fed reduced benchmark interest rates to almost zero. BTCUSD is trading at $9,387 at the time of writing.

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Current Situation
According to former Federal Reserve Chairman Ben Bernanke, the Fed’s efforts „can replace further rate cuts. Fed officials were questioned about the possibility of going negative after cutting interest rates close to zero.

However, last week’s Fed officials‘ economic projections indicate that they will not go into negative territory. Therefore, the Bitcoin projections should also be studied.

Although negative rates will eventually drive inflation, it is attracting the attention of more foreign banks such as the Bank of England and the European Central Bank.

According to Resenblum, co-founder of GSM, negative rates are likely to be more optimistic for Bitcoin because people may see negative rates as an indication of something „broken. Paul Tudor, founder of Tudor Investment Corporation, joined the Bitcoin Trader train last month, saying that BTC could be a hedge against inflation.

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