How Could The FED Affect Bitcoin?

Published 5 years ago on November 06, 2018

Here’s a question for you, what would happen to Bitcoin if the Federal Reserve decision starts to raise rates?Robert Leshner believes that if the Federal Reserve decides to raise rates it could hit the deflationary digital currencies such as Bitcoin. Leshner focuses on predicting the FED’s interest rates decision and notes that digital assets have only been around in a low-interest environment. With the FED tightening its policy, cryptocurrencies might be vulnerable as no one really knows how they will behave in a new monetary. He states:

We’ve always known crypto in an environment of essentially zero or low-interest rates. And that’s an environment of easy and loose money where capital has been prolific and looking for returns wherever it was found.”

The former economist goes on to explain that unlike traditional currency, a virtual currency like Bitcoin and Ethereum don’t bring any interest. Essentially this means no one will pay you for holding onto these assets.

“We’re finally starting to enter an environment of rising interest rates which crypto has never seen before and it’s going to be potentially challenging to the price of a lot of crypto assets just like it will be for a lot of assets in general, including equities.”

With all this in mind, Leshner thinks that stablecoins are the way forward and that they have great potential. It is no wonder that lots of firms, including Coinbase and the Winklevoss brothers’ Gemini exchange, are running to get involved in the stablecoin business.

As reported by FXStreet, the former economist believes that stablecoins like Tether are easy to launch and that they allow the issuers to get a free loan from users which buy them at zero interest. Leshner even predicts that soon we will have around 50 stablecoins being backed by all sorts of different fiat currencies. Even though the Federal Reserve may ban all the digital versions of the US Dollar, this isn’t something that will happen any time soon. It could lead to a whole new market for crypto companies to offer digitised versions of traditional currency.

“The advantage of tokenization is it brings transparency and programmability to currency. When dollars are open to blockchain there’s so much more innovation that can occur.”

What are your thoughts? Let us know what you think down below in the comments!

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Adrian Barkley

Adrian is an avid reader who first stumbled across Crypto after reading 'The Basics of Bitcoins and Blockchains' by Antony Lewis in 2018. Since then, Adrian has immersed himself within the industry, and has a real interest in Enterprise Blockchain solutions.