How will lower interest rates benefit Bitcoin?
Macro Markets, hosted by crypto analyst Marcel Pechman, airs every Friday on the Cointelegraph Markets & Research YouTube channel and explains complex concepts in layperson’s terms, focusing on the cause and effect of traditional financial events on day-to-day crypto activity.
Today’s show starts by discussing the economic crisis in Argentina, a Latin American country that is experiencing hyperinflation. After years of populist measures, its local currency, the peso, saw its value go down by 70% in two years. The government’s overspending caused another issue: a lack of United States dollars for the government and companies to pay for imports and remittances. But what does that mean for the U.S. dollar, Bitcoin (BTC) and gold?
According to Pechman, gold poses serious problems, as there is no easy way to ensure whether or not the precious metal is fake, and it doesn’t actually work for remittances. Therefore, dollars and euros are the preferred means of savings and exchange for those facing a weak domestic currency.
Pechman proceeds to explain how fintechs’ costs and government control limit their potential in Argentina, and why stablecoins are the preferred vehicle for remittances. On the other hand, the analyst shows why cryptocurrencies fail to attract people in those fragile economies, including El Salvador.
The next segment of Macro Markets focuses on the Federal Deposit Insurance Corporation (FDIC). Reuters reported that the 113 biggest banks in the U.S. will have to cover the recent FDIC loss of $16 billion caused by saving failed financial institutions. Consequently, there’s a cascading effect as the remaining institutions are obligated to cover the losses. Pechman mentions how the Federal Reserve will eventually reduce interest rates and benefit risk-on assets, including Bitcoin.
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