Janet Yellen spoke for the first time about a possible interest rate hike and this has startled bitcoin.
Since her statements at The Atlantic’s Future Economy Summit last night, anticipating possible decisions on an interest rate hike, stock markets have plummeted and Bitcoin has also reversed course.
Yesterday, BTC began reversing and fell to below $53,000.
The words of Janet Yellen
The US Treasury Secretary said that in order to prevent the economy from overheating, it may be necessary to raise interest rates. These are her words:
“It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat. Even though the additional spending is relatively small relative to the size of the economy, it could cause some very modest increases in interest rates”.
That was enough to trigger turbulence in the stock market. Bitcoin also halted its rally towards $60,000 and fell to below $53,000. Then came a partial recovery.
At a conference later hosted by the Wall Street Journal, the US secretary of state, who is also former chairman of the Federal Reserve, clarified:
“It’s not something I’m predicting or recommending. If anyone appreciates the independence of the Federal Reserve, I think that person is me”.
“I note that the Fed can be counted on to do whatever is necessary to achieve their dual mandate objectives”.
This was probably said to put a brake on selling on Wall Street and reassure investors. These words had a partial effect on Bitcoin, as the queen of cryptocurrencies returned to 55,000 dollars.
The point is that the US economy, buoyed by the trillions of dollars injected in the wake of the Covid crisis, is growing again. This flow of money combined with growth is increasing the risk of inflation, and to contain it, Fed Chairman Jerome Powell has suggested raising interest rates, a hypothesis evidently espoused by the US Treasury Secretary.
According to Bloomberg, President Biden would not be against it either, and would therefore be in agreement with Janet Yellen.
All this suggests that it is likely that the interest rate hike will happen and it will be something that the stock markets will have to adjust to. And so will bitcoin.
Janet Yellen’s statements on bitcoin
This is not the first time that Janet Yellen’s words have had the power to disrupt bitcoin’s market performance. After all, the US Treasury Secretary is one of the crypto-sceptics, so no particular encouragement for bitcoin can be expected.
It happened last February, when she reiterated her scepticism about bitcoin, and also in January, just after taking office, when she showed concern about the illicit use of cryptocurrencies. In both cases, bitcoin fell sharply in value.
At the time, bitcoin was far from today’s prices. Yet even today, although BTC has been consolidating its price above $50,000 for a while, Janet Yellen’s statements, even when they do not mention it directly, manage to influence bitcoin’s performance.