BUENOS AIRES, Brazil – Bitcoin futures are soaring as central bank moves to curb the market volatility caused by a possible increase in interest rates by the Federal Reserve.
The U.S. central bank has already signaled that it is willing to raise interest rate again next year and could move to do so again in 2021, but its move could push Bitcoin prices lower if the Fed decides to tighten the screws on the digital currency, analysts say.
“The Fed will certainly do its part, but this could push up the price for Bitcoin,” said Michael Pachter, head of the crypto currency research at Capital Economics.
Prices have fallen nearly 90% this year, according to CoinDesk.com.
In the past, the central bank raised interest rates in the summer of 2016, causing Bitcoin to spike to over $10,000 before plummeting to $6,000 and then rebounding.
As of mid-July, Bitcoin traded around $6.40, up from $5.30 earlier this month.
At the time, Bitcoin was trading at about $1,500 an ounce.
This year, the digital coin is trading around $1.50.
Bitcoin is still a volatile commodity, with a price fluctuating between $600 and $1-2,000, depending on the value of the coin.
Central banks around the world have stepped up their efforts to curb volatility in the currency, including in the U.K., Switzerland and Australia.
With interest rates still relatively low and the price of Bitcoin rising, it remains to be seen how much the market will react to the Fed’s move, Pachters said.
“It’s very difficult to say, ‘Well, maybe the Fed won’t do anything.'”
Pachter added that if the Federal Government did start to regulate Bitcoin, the price could likely rebound.
He said it’s hard to predict how much would rise, given that it’s very volatile.
“We don’t know what the Fed will do, but it will be interesting to see if it pushes prices up, because we have a lot of other currencies like bitcoin that have been doing pretty well,” he said.
Pachters also pointed to recent news that China is looking to regulate cryptocurrencies, with the country expected to impose a new law to restrict foreign exchange trading and restrict foreign ownership of cryptocurrencies.