Bank Of England Decides On Emergency Move, Crypto Rally Likely
The Bank of England has signaled privately to bankers that it will continue quantitative easing. It has signaled that it may continue bond-buying to stave off the pensions crisis. The Bank of England originally intervened with bond-buying as several pension funds were at risk of default.
Yesterday, Bank of England’s Governor Andrew Bailey informed investors that they will stop the bond-buying on Friday of this week.
UK Economic Crisis Explained
England’s economic situation unraveled as the newly elected Prime Minister Liz Truss and Chancellor Kwasi Kwarteng unveiled their new economic plan. The plan included a proposal for unfunded tax cuts. As a result, the sterling pound dropped sharply against the dollar. Investors also started dumping long-dated government bonds.
The Bank of England pivoted to quantitative easing to buy the bonds as the sell-off put various pension schemes at risk. Despite the UK government rolling back its plan, the economic crisis continued. A pivot to quantitative easing was a surprising move given the soaring inflation levels globally and in England. BoE’s Bailey highlighted that the bank will not extend its quantitative easing any longer.
However, it does seem that it has privately signaled its intent that it may continue the easing after all.
Is A Strong Crypto Rally Possible?
The macroeconomic situation is still dictating the price movement in the stock market. Since crypto is strongly correlated to the stock market, it is dependent upon the macroeconomy as well. The quantitative tightening from central banks led to a massive sell-off in the market. Therefore, the Bank of England’s pivot led to a strong rally.
If UK’s central bank does indeed go forward with the easing, the crypto market can see a strong rally.
However, the crypto market is more dependent on the US Federal Reserve. It does not seem likely that the Fed will pivot to easing any time soon. Therefore, any crypto rally will be short-lived.
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