The Reason Why Bitcoin Jumped by $2,500 in an Hour

The premier cryptocurrency, Bitcoin (BTC), consolidated in a range below $55,000 for most of the day on Wednesday, March 17. However, at the beginning of the US trading session, Bitcoin bulls took over and sent the price to $57,818 as the uptrend continues to gain strength.

BTC/USD 1-Hour Chart. Source: TradingView

More incentives — more expensive Bitcoin

The reason for the growth of Bitcoin was the decision of the Federal Reserve to leave the discount rate unchanged, despite the strengthening of the economy and rising inflationary expectations.

Following a regular meeting of the Federal Open Markets Committee (FOMC), the Central Bank raised its forecasts for economic growth for 2021 from 4.2% to 6.5%, but at the same time announced that it did not plan to raise the rate at least until the end of 2023.

Moreover, the regulator promised to continue buying bonds on the open market for at least $120 million. These purchases will provide the financial system with additional liquidity and stimulate economic growth.

The accompanying statement reads:

The recovery is moderate, with economic activity and labor market indicators heading higher, but the sectors hit hardest by the pandemic are still severely weakened. Inflation is kept below 2%.

Inflationary expectations have also risen. The FOMC expects personal consumption spending to increase 2.2% this year and decline to 2% in 2022.

Bitcoin as a hedge against inflation

Improved economic forecasts added optimism to investors and Bitcoin rallied higher along with other risky assets such as stocks. In addition, cryptocurrency is often viewed as a hedge against inflation and the demand for it grows along with inflationary expectations.

The Fed’s decision to keep stimulus despite the economic recovery could lead to overheating and higher price pressures. Bitcoin, on the other hand, was originally created as an asset with a predetermined supply volume and built-in deflationary characteristics.

Experts are confident that large-scale injections of liquidity into the economy are fueling a bullish trend in the cryptocurrency market. According to the head of the blockchain company Diginex Richard Byworth, this factor will play a key role in strengthening Bitcoin. According to the expert, Bitcoin price may rise to $175,000 by the end of 2021.

If you have any questions and comments on Bitcoin today, use the form below to reply.

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