U.S. Treasury Secretary Yellen said Tuesday morning that interest rates may “have to rise” to prevent the U.S. economy from overheating, and that bucket of cold water led to a quick market reaction. The bitcoin market was no exception, with bitcoin falling more than 7 percent at one point after Yellen’s comments.
Yellen said today at the Atlantic Monthly’s Future of the Economy Summit that “interest rates may rise somewhat to make sure our economy doesn’t overheat.” The change may be necessary due to rising levels of government spending. “While the additional spending is relatively small relative to the size of the economy, it could lead to some very modest increases in interest rates with the aim of achieving that redistribution.”
Yellen, who was named Treasury secretary in January, and has not been a big fan of bitcoin, added that President Biden’s huge spending would benefit the U.S. economy. She believes there is no adequate regulatory framework for cryptocurrencies and that cryptocurrency regulation is a topic worth addressing.
With this news, as of 12 noon this day, the U.S. stock market fell, with the Nasdaq down more than 2.5% and the S&P down more than 1%, while the crypto market also fell almost across the board except for dogcoin, while the dollar touched its high for the day.
If interest rates rise, in theory, because interest-bearing investments such as bonds or debt-based investment vehicles will be more attractive, investors may no longer be as inclined to consider other assets, such as bitcoin, as they are now. Lower interest rates tend to be accompanied by higher inflation, making bitcoin a hedge against a potential devaluation of the dollar.
That said, Yellen did emphasize the word “moderate,” so that doesn’t mean anything dramatic is going to happen.
Charles Bovaird, an analyst at Quantum Economics, said in an interview with Decrypt: “A modest rise in interest rates could have a modest impact on yields on fixed-income securities and push them higher. This could make interest-bearing securities more attractive relative to digital currencies such as bitcoin and ethereum.”
Bovaird added: “In any case, I don’t think a ‘modest’ increase in interest rates would have any huge impact on cryptocurrencies like bitcoin and ethereum.”
Alex Krüger, an economist and cryptocurrency trader, held the same view that the sell-off was a result of the cryptocurrency market following the volatility of stocks, which has happened frequently since the market crash triggered by the new crown virus last March. Yellen said the obvious, but the stock market overreacted,” he said. The fact that bonds have barely moved speaks volumes.”
Analyst William Clemente also noted in an interview with NewsBTC that 3,771 bitcoins were transferred to the trading platform in the last 24 hours. The transaction occurred before BTC pulled back to current levels. To support the long side, the analyst reviewed Bitcoin’s Market Value Realized Value (MVRV, an indicator used to measure potential local tops) and said:- “After the reset of the past few weeks, there is a lot of room for Bitcoin bulls to run from now on.”
As of press time, the market has rallied over the past hour, with both the S&P and Nasdaq pulling back and bitcoin correcting about 1.8%, which would be another evidence that one can continue to hold BTC for the long term, according to BitTrust News.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/u-s-treasury-secretary-yellen-says-interest-rates-may-have-to-rise-markets-react-sharply-there-is-no-adequate-regulatory-framework-for-cryptocurrencies/
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