Coin Bureau Looks at Impact of the Fed’s Monetary Policy on Price of Bitcoin

Popular crypto trading show Coin Burea recently discussed the potential impact of the Federal Reserve’s plans to increase interest rates on the price of Bitcoin.

As CNBC reported on December 15, the U.S. central bank hinted on that date that “its run of ultra-easy policy since the beginning of the Covid pandemic is coming to a close, making aggressive policy moves in response to rising inflation.”

The CNBC report stated:

For one, the central bank said it will accelerate the reduction of its monthly bond purchases.

The Fed will be buying $60 billion of bonds each month starting in January, half the level prior to the November taper and $30 billion less than it had been buying in December. The Fed was tapering by $15 billion a month in November, doubled that in December, then will accelerate the reduction further come 2022.

After that wraps up, in late winter or early spring, the central bank expects to start raising interest rates, which were held steady at this week’s meeting.

Projections released Wednesday indicate that Fed officials see as many as three rate hikes coming in 2022, with two in the following year and two more in 2024.

Per this report, Fed Chairman Jerome Powell said at a press conference following the FOMC meeting:

Economic developments and changes in the outlook warrant this evolution of monetary policy, which will continue to provide appropriate support for the economy.

According to a report by The Daily Hodl published on Decemebr 28, Coin Burea released a YouTube video on De3cember 26 that looked at how these upcoming interest rate hikes could affect the Bitcoin price and why long-term holders of Bitcoin did not need to fear them.

Per The Daily Hodl report, Guy, the pseudonymous host of Coin Bureau told the channel’s roughly 1.8 million subscribers that since investors mostly see Bitcoin as a risk-on asset, it is likely to suffer in the short term — just like stocks — in the event of any rate hikes:

In other words, portfolio managers and investors view it more as an asset class to generate strong returns and not one to act as a safe haven...

“As we’ve seen over this year, when there were fears about potential tapering, the price of Bitcoin fell.

Hence if the Fed was to carry on with its plans to increase rates and rein in that monetary stimulus, then Bitcoin is likely to fall with all other risky assets.

However, Guy also believes that Bitcoin is a great inflation hedge for those who can handle Bitcoin’s short-term price volatility:

“As we roll into the new year with persistent and stubborn inflation, investors are going to be looking for a lifeboat.

That’s why I think that Bitcoin is still the best bet against it.

If one can handle the short-term volatility that’s likely to come from the rate hikes, it’s perhaps the best bet to protect long-term purchasing power.

https://youtube.com/watch?v=DcnZYRhjQq4%3Ffeature%3Doembed

Disclaimer

The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.

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