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  • The US Federal Reserve pumped $168B into the financial system amidst plummeting markets. 
  • Bill Herrmann, CEO of Wilshire Phoenix, said that this move by Fed is small when compares to the grand scheme of things.

Recently, the US Federal Reserve has injected $168 billion into the financial system, correlating to Bitcoin’s present price drop. Speaking about this action of Fed’s, Bill Herrmann, CEO of alternative investment firm Wilshire Phoenix, said:

So long as the broader markets keep falling – expect the same out of Bitcoin.

Due to the Coronavirus outbreak and fears of oil trade wars, traditional markets have plummeted in recent times. According to a CNBC report, on March 12, the Dow Industrial Average (DJI) fell 10%, making it one of the most disastrous days the US market has witnessed since the Black Monday crash of 1987. Bitcoin suffered a similar fate, dropping from $6,000 to $3,850 on the same day.

To fight the falling markets, the US Fed injected cash worth $168 billion into the financial system on March 10. That amount totals about 82% more than all the money currently invested in Bitcoin. This market intervention by the US Fed dates back to September 2019. Herrmann said:

The Fed restarted repo operations last September soon after money-markets issues triggered a substantial loss of control over their interest-rate target.

The repo operation is meant to take in Treasuries, mortgages, and agency securities in exchange for cash. It’s basically a loan to a bank, collateralized by the aforementioned bonds. I know the Fed had hoped to keep this a temporary measure, but hope is often not a very good strategy.

He said that this latest move made by the American Fed is very small compared to the grand scheme of things.

The latest rounds of injections are like throwing pennies at a freight train and expecting it to stop — it’s simply not enough funds. My best guess is that the Fed was trying to instill confidence in the system, but what they need to do though is to stop thinking like academics and actually do something meaningful.

The CEO concluded by adding:

It may sound crazy, but I think it takes $700bn to over a $1tn to stabilize the markets. The last few weeks are a prime example of why digital assets, namely Bitcoin, have a place in the global markets.