Yesterday, US Treasury Secretary Janet Yellen expressed unfavourable views on bitcoin, and the price of bitcoin fell.
Is there a direct correlation between the two events?
First of all, it is worth mentioning that the price of bitcoin on Sunday had reached heights that are difficult to sustain in the short term. It had risen by 48% in the last two weeks alone, and by as much as 100% from just four weeks ago.
Such large and sudden rises are very difficult to sustain in the short term, especially if they occur in previously unexplored territory.
Thus, the possibility of a correction was more than likely, and Yellen’s words cannot be regarded as the cause of this correction, but at most as the trigger event.
In this regard, it is worth comparing the timing.
First of all, Yellen’s words yesterday follow other, somewhat similar, statements of hers, dating back to February 20th, i.e. the day before the price of BTC soared to new all-time highs. This seems to confirm that yesterday’s intervention by the new US Treasury Secretary is not the cause, but at most the trigger event for the decline.
Yesterday Janet Yellen spoke at the New York Times DealBook conference, hosted by CNBC’s Andrew Ross Sorkin, and said that she did not believe that bitcoin was widely used as a transaction mechanism, but that it was often used for illicit financing. She also called it “an extremely inefficient way of conducting transactions”, as the amount of energy consumed in processing transactions is “staggering”.
These statements were made between 3 PM and 4 PM CET yesterday, about half an hour after bitcoin’s price dropped from $52,000 to $48,000 in a matter of minutes – but in the previous five hours, it had already dropped from $56,000 to $52,000.
Hence yesterday’s sudden drop cannot be attributed to Yellen’s statements.
However, shortly after touching $48,000, the price of bitcoin rose again yesterday, just as Yellen’s statements were released, back to $54,000 over the course of the rest of the day.
Overnight, in the wake of the Asian markets, the price fell again, returning to around $48,000 today.
It is likely that these dynamics are only superficially influenced by the news in the crypto markets, not least because Yellen, despite being the former Fed governor and current Treasury Secretary, now plays a clearly political role in the new Biden administration, so her words should no longer be seen as those of a disinterested technician seeking consensus, but instead as political propaganda with the main aim of acquiring it.