The Impending Global Negative Interest Rate Regime Bodes Well for Bitcoin

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The widely-publicized Bitfinex heist, which is the second biggest Bitcoin exchange hack after MtGox in 2013, may have a short term negative impact on the way general public perceives the novel technology. However, the Bitcoin blockchain - the backbone of the digital currency - was never compromised and the network continues to function without a hitch. The same could not be said for the world’s financial system!

Big brokerage houses like Interactive Brokers have already begun implementing negative interest rates on clients holding EUR, CHF and SEK balances. And negative interest rates have also begun to creep into corporate banking as well. Today, Royal Bank of Scotland announced that starting Monday, corporate clients such as fund managers and pension funds will be charged for holding cash in certain foreign currencies, including the euro. According to a Daily Mail report, RBS stated that negative interest rates may also be applied to small business; that is if the Bank of England decides to cut interest rates into negative territory to stimulate the sagging British economy.

Most of Europe and Japan are already in a negative interest rate regime, with the US and UK very likely to follow suit in the coming months. Consumers have so far been spared the direct sting of negative interest rate as banks have tried to absorb some of the cost by increasing fees on some services, but as the RBS has already demonstrated today, this will not be the case for much longer:
“Until now RBS has absorbed these costs and imposed a zero per cent minimum on deposit rates. But it said this was no longer sustainable.”
It is precisely at this point that digital assets and currencies like Bitcoin will begin to gain serious traction with small businesses and consumers. Bitcoin has a fixed supply and can’t be inflated away at the stroke of a pen. The coming global negative interest rate environment bodes very well for the future of Bitcoin and digital assets outside the legacy financial system.

Bitcoin Price Analysis:

Bitcoin took a big hit in the aftermath of the Bitfinex hack, where close to 1% of all Bitcoin in existence were stolen, but the digital currency has stabilized over the past two weeks. The Bitcoin exchange rate has been hovering around $580 for the past two weeks. In fact, the $580 level has been used as support about three times in August, and once as resistance on the 16th.

Bitcoin broke above $580 today and this pivot zone may start to now act as support and prop-up the market. It seems that another rally towards $600 may materialize over the next few days.

In case $580 doesn’t hold as support and price breaks south again, the $565 area may come into play as support due to its prior history.

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