Bitcoin Price Rebounds and Swiss Franc Surges as SNB Removes Euro Exchange Rate Cap

By Kyle Torpey Jan 15, 2015 7:02 AM EDT

NEW YORK (InsideBitcoins) — In a move that has shocked markets around the world, the Swiss National Bank has decided to remove its policy of capping its currency’s exchange rate at 1.20 francs per euro. The decision from the central bank ignited a move well over euro parity for the franc, as it peaked around 1.15 francs per euro. This was a nearly 30% rise from where the franc opened the day against the euro. The Swiss franc is currently enjoying a gain of over 15% against all of its major counterparts for the day at the time of this writing.

The story of the currency cap

It was in September of 2011 when the Swiss National Bank first shocked markets with the announcement of their proposed currency cap. The move was part of the ongoing currency wars, with a goal of preventing a recession. Like many other central banks around the world, the SNB was mainly concerned with not allowing their currency to become a safe haven during a time of slow economic growth.

The original move to enact the cap in 2011 led to a quick 8% drop in the franc against other major currencies, and today’s removal of the cap has sent the franc soaring in the opposite direction.

Interest rate cut

In addition to removing the cap on the franc’s rate of exchange with the euro, the Swiss National Bank has also dropped interest rates for certain types of deposits at the central bank to -0.75%. The central bank’s main interest target has also been moved to between -0.25 and -1.25%. Negative interest rates had already been in place in Switzerland since December, and this will increase the costs of holding cash deposits for investors.

Bitcoin spikes with gold

While the Swiss franc has had quite a volatile Thursday, it doesn’t look too unstable in comparison to bitcoin’s recent price swings. The digital currency is already down 30% on the year, which follows the long, painful decline in price over the course of 2014.

Both gold and bitcoin spiked on the news coming out of the Swiss National Bank, which follows a trend of bitcoin tracking gold during certain events in global markets. Although bitcoin has followed gold’s lead in the past, it is uncertain how the digital currency would act in a true economic crisis.

Bitcoin rose 8% on the news, while gold was up roughly 2.5% to over $1260. It seems that bitcoin has found a bottom near the $175 to $200 range for now, but the cryptocurrency has proven to be rather unpredictable since the start of the new year.

While bitcoin has dealt with its own issues as a speculation over the past year, this move from the Swiss National Bank shows that fiat currencies can also have their own unexpected swings in price.

You can follow @kyletorpey on Twitter.

 

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  • Martin C

    yeah I have heard the bitcoin haters predict the death of bitcoin so many times even when I was buying hundreds at $5 and every time bitcoin price went down it rebounded to new highs.Meanwhile just google DACs and decentralized internet and you will see the growing number of uses for the blockchain technology to disrupt the worlds financial systems eliminating bankers lawyers and govt regulators giving the people true freedm to transact without interference. Bitcoin the currency will be used in so many ways you can’t even imagine in 5 years just like the internet does today.In the end bitcoin is very useful and RARE which means mathematically it will rise in value compared to toilet paper money which has lost 97% of its value since the creation of the banking cabal known as federal reserve. Bitcoin is 89 percent correlated with the price of gold and note that gold is breaking out from a triple bottom as well as silver. The global collapse is in progress which will only make bitcoin more of a safe haven.

  • Ryan Kim

    Keep dreaming

  • Martin C

    Adoption of bitcoin IS increasing as venture capital inflows demonstrate and new merchants.Once a killer app like gotgems comes out that pace will quicken.Most importantly when the global economic meltdown picks up steam then bitcoin will be like gold a safe haven as it is RARE and very useful for privacy and transfer ease with little or no cost.Bitcoin 5 years from now will be well into the thousands od dollars if dollars even exist.

  • lakawak

    A rebound would be a bounce back to where it was originally. This is nothing but what has happened for the past 13 months. Every time there has been a major drop in price, it briefly bounces back up…but always below where it started before the drop. Then it may be steady for a week or so. Then it drops again. Then it bounces back to a lower price..and so on and so on.

    And this downward triangle will accelerate now that the price is reaching the squeal points not only of miners, but of people holding large amounts of bitcoin that were hoping to retire on what they make. The price is getting low enough that they are afraid they WON’T be able to live off it so they are panic selling. (As they should be.)

    One thing is for sure.,.there is certainly nothing to predict if INCREASING long term ever again. the people getting OUT of bitcoin is far greater than the number of people newly adopting it. And it isn’t as if adoption is going to INCREASE now.

  • Keith Darby

    Good news!

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