Bitcoin's price jumped Wednesday by the most in six weeks, outpacing U.S. stocks, after the Federal Reserve pledged to keep pumping new money into markets and government data showed the economy sliding into recession.
Bitcoin rallied 12% to $8,703 as of 19:30 UTC (3:30 p.m. Eastern time). The Standard & Poor's 500 Index rose 3.1%.
In terms of year-to-date performance, bitcoin's returns increased to 20%, surging past gold's 12%. Many cryptocurrency investors see bitcoin as a hedge against inflation, similar to gold, which could theoretically be a long-term consequence of central-bank money injections. Deutsche Bank estimates that central bank balance sheets have expanded by some $3.7 trillion just since the start of March.
The Fed, led by Chair Jerome Powell, said it would keep benchmark U.S. interest rates close to zero while reiterating a pledge to continue buying U.S. Treasury bonds and other assets in an unbounded amount to keep global markets functioning smoothly. Some economists had speculated the central bank might announce plans to start tapering the asset purchases, which along with emergency-lending programs have ballooned the Fed's balance sheet past $6.5 trillion for the first time in its 107-year history.
"It's clear that the effects on the economy are severe," Powell said during a press conference Wednesday. Reporters, based remotely, dialed into the event via a group video call. "We won't run out of money. It's an unlimited pot."
The Fed's announcements came after a report from the Commerce Department's Bureau of Economic Analysis earlier Wednesday showing that gross domestic product contracted at an annual rate of 4.8% during the first quarter as government issued stay-at-home orders. The report provided what economists described as the first official data confirming that the country is sliding into a recession.
Powell, in his press conference, warned that second-quarter economic data will reveal the "unprecedented" damage from the coronavirus.
Bitcoin's rally was likely abetted by "fear of missing out," or FOMO, on the part of traders, said Kevin Kelly, co-founder of Delphi Digital, a cryptocurrency research firm.
"Buying begets more buying," he said.
Bitcoin tumbled 11 percent during the first quarter of 2020, but the price has soared since the start of April.
“Bears are yet to put up any fight and, given the contained squeeze past $8,000," said Denis Vinokourov, head of research at BeQuant, a London-based institutional bitcoin brokerage firm. Such trading action "suggests the upside may have some longevity.”