Topic: Federal Reserves adjusting interest rates - Implications for BTC? (Read 857 times)

LIBOR today broke above 1% for the first time since May 2009 - Dollar shortage.

During 2017 the negative interest rates will turn to positive interest rates and the US dollar

will increase it`s value.I don`t know if this will have impact over bitcoin,but it`s good news for me.

The Fed raising rates has huge implications for the global economy and therefore bitcoin.

Rising rates:

Equal a stronger dollar.

Emerging market currencies are worth less (devalued).

Emerging markets who have debt denominated in dollars now have to pay those dollars back in weaker local currencies.

Reserve banks therefore have to use up more FX reserves to defend their currencies.

This leads to a dollar 'shortage' - this is best identified by observing the Eurodollar market (basically US dollars held outside the US financial system) and the LIBOR rate (which has been in uptrend for a while). This is not a good sign.


So, why how does this affect bitcoin?

If you have assets held in a devaluing currency (like almost every currency in relation to the US dollar) you are losing wealth.

Bitcoin is an asset outside government control.

Bitcoin is a way to transfer your money into a US dollar denominated asset (that also happens to be rising) and gives you the ability to transfer it anywhere in the world.

If your country has capital controls (China) then bitcoin is a way to elude them and preserve your wealth at the same time.

If your country has inflation (Venezuela) then bitcoin is a way to preserve your purchasing power

If your country is banning cash (Europe, India) and herding you into digitization then bitcoin is an asset outside your governments control.

If you are in another country and think this may come to your country then bitcoin is a great hedge & escape route to preserve and possibly increase your wealth.

Check out a chart of the devaluation of the Yuan (Chinese currency) and the price of bitcoin overlapped. It is almost identical. The last little while has seen a sharp spike in bitcoins price - this may be an indication of a coming devaluation of the Yuan (eventually this may lead to another 'China bans bitcoin' phase).

Bitcoins price will increase since people are now capable of doing loans to purchase bitcoin with a very low interest rate. Its only a guess but imagine if this is true then the price of bitcoin will surely surge up. Since many are attracted to bitcoins but doesnt have enough capital to purchase bitcoins then it is their time to make some loans.

It will affect to all the currencies as the price of bitcoins is related to dollars and other currencies of the world .as u know if dollars hits an impact then so does bitcoins .

Thank you all for the inputs. BTC and relations to international affairs and fiscal policies are new areas that could be studied.

It will not affect bitcoins but if that issue affects the bitcoin market then it will affect bitcoin economy and cryptocurrencies as well. But in my opinion this is not an important issue for bitcoins since it will not bring a negative impact on bitcoins. So lets just enjoy bitcoins, that news is a good news and lets just be thankful that interest rates go down.
 

I have yet to see a single relation between what the federal reserve is doing and BTC. They're not related in any way. Each one goes its own way without looking at what the other one's doing.

Not for nothing, but I'm holding some Bank of America stock (love voting the proxy each year), and I am eagerly awaiting an interest rate hike.  It's been so frigging long since rates have been above zero.  As far as bitcoin goes, I'm not sure it'll have an effect at all.  It's an unusual asset that still has an unknown correlation with interest rates and other things.  It'll be interesting to see if anything actually happens.

I agree. I can't see any significant effect of interest rates on Bitcoin. One of the reasons is that the people that buy Bitcoin come from a totally different stratum than investment managers who invest based on interest rates. Another reason could be that people who buy Bitcoin are highly likely to hold it, because it's a totally unique asset that has certain advantages and high growth potential that no other asset possesses. So Bitcoin is bought regardless of the interest rates, because people who decide to buy it are already fed up with the FED and don't expect any positive outcome, regardless which interest rate is implemented...

I consider high inflation a more significant contributor of capital flow into Bitcoin. The reason is that inflation is felt by everyone and is a high motivator to seek for alternative stores of value. Therefore high inflation makes it more likely that new groups of people discover Bitcoin as a solution for their fiat problem. The Bitcoin growth in Venezuela and Russia is at least an indicator for this.

ya.ya.yo!

I don't have any specific data ragarding interest rates and bitcoin. But we could see huge dollar drop in recent weeks and I believe it was reaction to last FOMC meeting.
The Fed has been threatening to raise interest rates for a while, I can only imagine it will a boost for bitcoin as some investors will leap from USD to crypto.

There needs to be a vehicle for those rich to hoard their funds. But the rich already have properties, gold, stocks. Right now, they need a place to hold their liquid funds and prevent it from devaluing?

Just speculating.

Depending on what the Fed does, it might either make Bitcoin go up or down (obviously), however, I think regardless of what happen it'll more than like end up making Bitcoin see an upward swing. If interest rates go higher, there might be some money put into Bitcoin to safeguard against a lot of the fallout from that decision, if they go lower chances are nothing will really change, and if interest rates go negative, then chances are the value would go down as whales and so go to take loans that give them money.

Sounds like we should dump our coins?

I think it would still have pretty minimal implications, people would just us other means to safeguard their funds.
Many financial experts still view Bitcoin as something that's not stable enough.

The value of the dollar will always have an impact on what bitcoin's price will be.
If it has anything to do with economics then it will effect bitcoin.

Bitcoins sounds like some safe haven to park funds.

Any recollection on the last rate hike and its impact on Bitcoin price?

if federal interest rate is changed it will affect interest rates on other banks mainly on dollars, if the interest rate is lower ,then barrowing loans will become more , if it rate is increased to higher fixed deposits amount will increase and as bitcoin to dollar price also varies accordingly , any way it will not affect very much on bitcoins .

the dollar would suffer a i think some major sell off on after the Commerce Department. that was less than half of what economists had expected.

i think there were no major market-moving events influencing bitcoin. The highly anticipated bitcoin halving event has had a minimal impact on prices, a sign the cryptocurrency had entered into a period of increased stability following a boom-and-bust three years.

What are the implications for BTC prices when Federal interest rate changes? Any precedents?