2021-5-5 21:02 |
The price of Bitcoin is on a slide, hitting $53,200 so far and dragging Ether down with it to $3,175 from its latest all-time high of $3,535 on Coinbase.
This latest weakness in prices is in line with the sell-off seen in the traditional markets. The S&P 500 also dropped just about 2% before seeing a slight increase, the same as Dow Jones Industrial Average, which fell about 1.3%. Nasdaq, meanwhile, is on a decline since last Monday by more than 4.5%.
The USD index, in turn, saw a small uptick and is currently around 91.30. Trader Light noted,
“Something spooked equities. Will likely put pressure on crypto and torch the recent leverage build up. BTC was weak and is already buckling, ETH will probably wick down on liquidations shortly.”
What spooked the traditional markets was Treasury Secretary Janet Yellen talking about increasing the interest rates. During an economic seminar presented by The Atlantic, Yellen said,
“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.”
If rates get increased, people would be risk-averse and more interested in keeping their money safe in bonds.
Ever since the Covid-19 pandemic broke out early last year, Congress has printed trillions of dollars and injected them into the market, inflating the prices of the assets. This increase in money supply and virtually zero rates have been the primary drivers of Bitcoin’s wild rally from March 2020 low of $3,800 to a new all-time high of $65,000 last month.
The Biden administration is currently pushing for another $4 trillion infrastructure plan, and Yellen wants higher taxes to pay for this, arguing that the US needs to contain deficits over the long term though she said the government still has “a reasonable amount of fiscal space.”
President Joe Biden is “taking a very ambitious” and “active” approach, “but we’ve gone for way too long on letting long-term problems fester in our economy,” she said.
The Federal Reserve, which Yellen led from 2014-18, has been keeping the short-term rates near zero for over a year and time and again Chair Jerome Powell promised the market that it would be kept that way until the 2% inflation and full employment is achieved.
While inflation concerns are rising, Yellen is not largely concerned about it becoming a problem, and should that happen; there are tools to address it, she had said. Just over the weekend, Yellen had told NBC that,
“We’re in a good fiscal position. Interest rates are historically low. They’ve been that way for a long time, and it’s likely they’ll stay that way into the future. But we do need fiscal space to be able to address emergencies, like the one that we’ve been in with respect to the pandemic.”
Bitcoin BTC $ 53 125.39 -7.11% Ethereum ETH $ 3 234.67 -5.93% Binance Coin BNB $ 607.54 -10.25% The post Treasury Secretary Spooks the Traditional Market; Bitcoin Slides Down & Drags Ether with it first appeared on BitcoinExchangeGuide.Similar to Notcoin - TapSwap on Solana Airdrops In 2024
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