Bitcoin spiked above $52,500 for the first time in history on Wednesday after the release of the Federal Open Market Committee’s minutes of its January 26-27 meeting.
The benchmark cryptocurrency hit a record high of $52,584, according to data from Coinbase, against a flurry of mood-lifting events. That included US carmaker Tesla’s $1.5 billion investment into the Bitcoin market, followed by MicroStrategy’s intention to purchase another $600 million worth of bitcoins by raising funds via a private debt sale.
In February alone, the cost to purchase one Bitcoin shot upward by more than 58 percent.
…the price spike on Wednesday came after Federal Reserve officials agreed that ultralow interest rates and continued debt purchases would be necessary to pull the US economy out of recession.
Minutes from the FOMC meeting—released 1400 EST on Wednesday—showed policymakers having an optimistic outlook on the US economic recovery. They anticipated that the $900 billion stimulus package from December last year, followed by progress in speedy COVID-19 vaccination, would accelerate the rebound.
“While we should not underestimate the challenges we currently face, several developments point to an improved outlook for later this year,” Jerome Powell, the Federal Reserve Chairman, said at the news conference later.
Economists have long debated the possibility of higher inflation once the government lifts pandemic-related restrictions. Some believe that President Joe Biden’s $1.9 trillion stimulus would give Americans enough money to spend due to pent-up demand, which would drive the prices higher. But others note that higher employment would keep people from spending, thereby keeping inflation lower.
Nevertheless, Fed officials do not treat the scenario as means to tighten its dovish policies for now. They decided to continue purchasing $120 billion worth of government and corporate debts every month until their goals of lower unemployment and a 2 percent inflation are achieved.
Bitcoin tends to benefit from the uncertainty. The cryptocurrency emerged as a “pandemic winner” against the same policies in 2020. That allows retail traders and now even corporates to look at it as a safety net against inflation. Tesla, MicroStrategy, Square, and other firms have added Bitcoin to their balance sheets for the very same reason.
“There’s going to be a new set of companies that come into the economy who already have Bitcoin on their balance sheets. Yet another way in which Bitcoin is going to sanctify the corrupt fiat economy,” said crypto author Jimmy Song.
Bulls now expect Bitcoin to tear above $55,000.