Is Fed tapering bad for Bitcoin?

The Fed will finally begin tapering its huge bond-buying programme this month as the US central bank seeks to continue recovering from the pandemic while addressing the spectre of inflation.

After months of deliberation over the level of support required for the US economy, the Fed came to a decision amid the intense pressure of rising prices.

The Fed revealed via a statement that it will reduce the rate of asset purchases by $15bn each month, beginning in November.

Its purchases of US Treasuries will fall by $10bn to $70bn each month, while its buying of government-backed mortgage bonds will fall to $35bn, down from $40bn.

Interest rates remained close to zero while economists expect them to rise over the coming years, beginning in 2023.

What could this mean for Bitcoin?

One possibility is that its appeal as a hedge against inflation could be diminished as the Fed takes a more hawkish tone.

The price of Bitcoin certainly didn’t react very well to the Fed’s announcement.

Bitcoin’s performance has also historically been aligned with the performance of US stocks, which could fall as the Fed tightens its monetary policy, causing higher borrowing costs.

However, Max Keiser takes an alternative view, arguing that the US dollar’s collapse is inevitable, while Bitcoin will be the escape hatch.

“The Fed will keep rates near zero until the $USD collapses and the American economy disintegrates. The End,” Keiser said.

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