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In this episode of Bitcoin Magazine’s Fed Watch podcast, Christian Keroles and Ansel Lindner give an update on bitcoin’s price action over the last two weeks, speak about the Tether’s settlement with the NYAG, provide expert commentary on Chairman Powell’s testimony, and dive deeply into how bitcoin fits into the macro landscape.
Bitcoin’s price action has been quite volatile, but bitcoiners are used to that. After breaking out of January’s consolidation it rose 50% to threaten the round $60,000 level before pulling back and consolidating. There is some apprehension about this pull back, because many people were ready for price to go up and never come down again. Of course, there will be periods of gains followed by times of consolidation. Nothing to get concerned with at this point.
Tether also had some very bullish news this week on Tuesday morning when it was announced that they settled with the NY Attorney General to pay an $18 million fine. But what exactly they are paying the fine for must be implied. Despite claims by the NYAG of wrongdoing, no convincing evidence was produced to justify pursuing the case further. This new appears to be quite bullish for the bitcoin industry as Tether provides a significant portion of liquidity on the fiat side of trades.
Next the co-hosts breakdown some of Chairman Powell’s testimony given to the Senate on Tuesday. At the time of recording, the proceedings were just ending and the tweets about Powell’s bitcoin and “digital dollar” comments were already starting to fly. Ultimately, there was nothing new on this front from the Fed’s chief, he reiterated previous comments using very similar rhetoric, with the sole exception of adding that a digital dollar was a “high priority.”
The basic position of the Fed on a digital dollar remains cautious. They are working with partners like the University of Texas and MIT on research initiatives but they take their role as provider of the reserve currency very seriously. They will not move quickly on a digital dollar. As comparison, the ECB is on the forefront of this movement for different reasons, but even they are admittedly still 4 years away. If there is to be a digital dollar, separate from the market provided digital dollars already very successful like Tether, it will be at least 5-8 years away.
Powell also spoke on inflation. Much information can be gathered by a careful listening to his word choices. He says we may see prices picking up as the economy reopens. But that is not a strong statement, it is one made from a academic framework, not real world data. He also says the Fed has the tools to keep inflation under control. But no mention of tools to keep deflation under control, which is the primary atmosphere we are dealing with at this time. Lastly, in regards to recent rises in longer term Treasury rates Powell said rates are moving up because of expectations of economic recovery. This is a subtle but important point that Ansel emphasizes, Powell is not saying rates are moving up because of actual recovery, only the expectation of recovery. And what happens when those expectations turn negative?
This wide ranging podcast episode ends with a foray into how bitcoin fits into the world of macroeconomics and even geopolitics going forward. We are aware that bitcoin is making an entrance onto the broad international monetary scene, but what will that look like later this year and going forward? Where does bitcoin fit? You’ll have to listen to find out what Ansel and Christian say, it might surprise you.
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Ansel Lindner
Economist, author, and bitcoin specialist. Find more from Ansel at the Bitcoin & Markets podcast (bitcoinandmarkets.com), the BitcoinDictionary.cc, and new macro blog Bitcoin & Markets Research (BTCM.co).
