Will falling stocks and fiscal stimulus be good for crypto growth?


Stock markets recovered a little earlier this week as the world’s central banks joined forces to keep their respective economies afloat. Crypto markets mirrored that action but could further economic stimulus packages actually be good for crypto growth?

QE and rate cuts good for crypto?

Brian Armstrong, CEO of US crypto exchange Coinbase, recently tweeted on how the fiscal stimulus efforts by the world’s major economies could actually be good for crypto growth.

He stated that a falling stock market, interest rate cuts, and quantitative easing could encourage investors to a move funds into crypto assets that are viewed as a hedge against inflation.

His reasoning continued adding “This could be the year where the mindset of institutional investors begins to shift, from crypto as a venture bet, to crypto as a reserve currency.”

Yesterday the US Federal Reserve slashed interest rates by half a point for the fourth time since June 2019.

The lower rate is intended to encourage spending, borrowing and money flow through the economy as fears of the Coronavirus outbreak spread.

The reaction was not positive though as stock markets resumed their downward momentum.

Chief investment strategist for State Street Global Advisors, Michael Arone, told MarketWatch, “I think the Fed’s rate cut backfired in many ways. Instead of soothing the market, it’s reignited investors’ worst fears.”

Global stimulus efforts

In a statement on Tuesday, the Group of 7 (G7) finance ministers and central bankers raised the possibility as well, stating they “are ready to take actions, including fiscal measures where appropriate,”

Across Asia, governments have been taking all kinds of measures to stimulate their economies from cash handouts in Hong Kong and Singapore to rent reductions in South Korea.

China has suffered massively, being the epicenter of the outbreak.

According to reports last week regional authorities have cut or deferred taxes, fees, and social security payments, in addition to providing subsidies and rental assistance.

They have also asked banks to roll over debt at lower interest rates for businesses and individuals.

This massive effort to print more money and inject more liquidity into crumbling economies just shows how fragile the current banking and financial system is.

It is unlikely that retail investors will start pouring money into crypto, especially is their pay is getting cut because they’re quarantined at home.

Institutional investors, who already have deep pockets, will definitely be looking for a hedge however so Armstrong may have a point with his comments on crypto growth this year.

Martin Young

Martin has been writing on technology for 15 years, he has a keen eye for emerging cryptocurrency news, blockchain developments, and market sentiment.

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Martin Young

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