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The US Federal Reserve announced a new set of measures to help the market in the current ongoing crisis. Among these moves is an open-ended commitment to keep buying assets under the quantitative easing measures. The markets responded with an uproar, and Bitcoin followed, charting a quick 13% increase before retracing to its current levels.
“Open-Ended Commitment” To Purchase Assets
The Federal Reserve announced a new set of measures aimed at saving the collapsing markets. Among the most impressive ones is the commitment to keep buying assets under its quantitative easing measures in an open-ended channel.
Without putting any estimation or without establishing an upper boundary, the announcement said that the US is prepared to employ the purchasing program “in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy.”
Essentially, this opens a whole new chapter in the Fed’s “money printing” because it commits to keep expanding the balance sheet rather than committing to a certain amount.
There are other measures that the Fed will be employing – they’d be purchasing mortgage-backed securities while also moving into corporate bonds, buying securities in secondary markets and through ETFs, and so forth.
Speaking on the matter was Chris Rupkey, a chief financial economist at MUFG Union Bank, who said:
The central bank is shifting from being not just the lender of last resort, but now it is the buyer of last resort. Don’t ask how much they will buy, this is truly QE infinity.
Markets React Immediately
Upon the announcement, all the markets reacted positively, charting a quick increase. The S&P 500 futures shot up to 2,345, while NASDAQ 100 futures increased to 7,200. However, the markets were quick to retrace as the Nasdaq futures dropped to 6,990 and S&P 500 to 2,270.
It’s interesting to note whether or not these measures will have a long-term positive effect on the market. They do seem quite extreme as this would put even more strain on the US dollar, reducing its value on the way.
At the time of this writing, spot markets opened on a negative as the DJI, and the S&P 500 fell by 0.8% while Nasdaq 100 fell by 0.2%.
Bitcoin also followed the markets today. It spiked from about $5,800 to $6,600, charting an increase of about 13%.
However, it demonstrated a complete correlation with the traditional markets as its price retraced and is currently trading at around $6,200.