The value of bitcoin surged more than 30% on Wednesday after the Federal Reserve raised interest rates, boosting confidence and raising hopes for a rebound in the cryptocurrency.
The FOMC decision, which will likely be appealed by the Trump administration, was met with mixed reactions from bitcoin investors.
Bitcoin’s price has soared more than 10% since the Fed decision.
However, that surge has come at a cost.
Some bitcoin investors are calling for the FOMc to allow banks to lend bitcoin to businesses, a move that would allow them to pay back the interest they owe on their bitcoin investments.
“It will probably have a positive impact on the value of the coin,” said Anthony Di Iorio, founder of CoinLab, a New York-based blockchain startup.
“It’s not a big deal, because we have a bank that we’re comfortable with that’s willing to lend us money.”
Some bitcoin investors believe the Fomc decision is part of a wider effort to undermine bitcoin, with some economists suggesting that the central bank is using bitcoin to prop up a currency whose value has plummeted over the past year.
“There is a perception that bitcoin is just a bubble,” Di Ioria said.
“People are taking advantage of the fact that it’s not as liquid and that it has lost so much value.”
A spokesman for the Federal Deposit Insurance Corporation, which oversees the financial system, said the Fed’s decision was “consistent with the Federal Open Market Committee’s view that the Federal Funds rate should be set at a level consistent with the long-term outlook for inflation, unemployment, and other economic indicators.”
The Fomcians decision follows the Fed raising its overnight rate to 2% and other central banks in Europe and Asia to move toward a rate of 1% as inflation pressures intensify and deflation in emerging markets.
Bitcoin’s value has fallen by more than 40% since mid-June.
However the digital currency is still seen as a viable investment alternative, even though its supply is limited and its price is volatile.
“When the Fed raised interest on the debt, they were signalling that it was going to be a long-run thing, that this would be a longer-term thing,” said Peter Lee, founder and chief executive officer of the New York Bitcoin Association.
“This time around, they are saying, ‘OK, let’s get it under control.
We will have more to say on this.'”
While the FOC has said it is willing to consider additional measures to stimulate the economy, bitcoin remains heavily discounted by the financial services industry.
Bitcoin is viewed as risky and speculative by investors.
Bitcoin has seen more than 1,000 daily trading volumes over the last two weeks, according to CoinMarketCap.
The digital currency has traded at about $1,300 per bitcoin, which is slightly below its highs of $2,000 and $3,000 on Wednesday.
However, bitcoin has become a hot commodity over the course of the past several months, with investors rushing to buy the cryptocurrency to protect their holdings and hedge against the drop in value.
“I’m not sure what is going to happen in the next six to 12 months, but I’m pretty sure that it is going, and the price is going up,” said Charlie Shrem, a former chief executive of bitcoin exchange Coinbase.
“The market has gone crazy.”
For investors, bitcoin offers a way to hedge against rising inflation and risks associated with financial institutions, particularly those in the United States.
Bitcoin also has a place in the tech industry, where it has been used by many companies, including Apple, to conduct digital currency transactions.
The Federal Reserve is currently reviewing the cost of bitcoin, and has hinted it could cut rates even further if inflation worsens.
A Fed rate cut is expected next month.
“This is the most volatile currency in the world,” said Di Iorensi.
“If you take a look at what is happening in the rest of the world, it is a pretty volatile currency.”
In response to the Fowls decision, the Bitcoin Foundation said it would continue to advocate for the currency.
“The Feds decision will help the cryptocurrency market in two ways: 1) it will encourage more people to become involved in the currency and 2) it can lead to a wider acceptance and adoption of bitcoin,” the foundation said in a statement.
“We hope this will serve as a signal to the Federal Government to continue its efforts to promote the value and adoption and ease of use of bitcoin by its citizens.”
