Despite the controversy over the counting of votes, Joe Biden won the US presidential election, and Donald Trump is to hand over the reins of power to him. The public is now curious about who, along with the Democrat, will rule the power for the next four years. We are especially interested in the economy. And here comes the name of Janet Yellen, who will be in charge of economic policy. What does this mean for Bitcoin and other cryptocurrencies? We will try to answer this question in the article below.
Who are you, Mrs. Janet Yellen?
According to The Wall Street Journal, Biden plans to nominate Janet Yellen as secretary of the treasury. He is not a person completely unknown to the world of finance …
On the contrary. As early as 1994, US President Bill Clinton offered her membership to the Fed’s Board of Governors. As a result, in 1997-1999, Yellen was the chairman of the council of economic advisers to the US president. After 1999, she left politics and returned to work at the university. However, in 2004, she again moved to the Fed offices and took over as president of the Federal Reserve Bank in San Francisco, which she was until 2010. It then became famous for predicting the 2008 US real estate crash that started the previous economic crisis.
In 2009, she was nominated head of the Federal Reserve, but was eventually entrusted with Ben Bernanke. A year later, however, Yellen was appointed deputy head of the Fed. And here comes the first problem. She is believed to be the co-creator of the Fed’s QE policy. However, we will come back to this.
On October 9, 2013, the President of the United States, Barack Obama, nominated her as the chairman of the Board of Governors of the United States Federal Reserve System. On January 6, 2014, her election was approved by the US Senate by a vote of 56 in favor to 26 against.
Now she is to become the first US Treasury Secretary in history (previously this function was entrusted to men).
Bitcoin is nothing useful!
We will come back to what policy it can lead from an economic point of view. However, we may be disturbed by the fact that it is not – to put it mildly! – Bitcoin supporter.
We know that she criticized cryptocurrencies during the last great boom three years ago. That’s when she more or less concluded that Bitcoin was for her “Anything but useful.”
Can he now strive to destroy the cryptocurrency market? Apparently, one could say that, but there is one big “but”. She said it three years ago. Back then, the digital asset market was more like the Wild West than any other civilized space. The 2017 bubble will go down in history as the one that created a mass of ICOs. Many of these projects turned out to be scams. The cryptocurrencies themselves rose on the charts, but it’s hard to say whether their foundations justified the boom.
Today, things are quite different. Big investors have opened up to Bitcoin (the first names are: Square and Microstrategy), and even PayPal is starting a service that will allow the company’s customers to pay in BTC and other digital currencies for services and products.
– I think there will be more and more cryptocurrency use cases, which will make Bitcoin (BTC) more widely accepted over time, more stable and possibly more valuable PayPal’s CEO Dan Schulman even said recently on CBDC.
– PayPal (@PayPal) November 23, 2020
In turn, speaking at the CNBC Evolve summit, Visa CEO Alfred Kelly said that the future of money is its digital, not paper, forms.
– Cryptocurrencies are [najbardziej] the developing part [rynku] payments in the world. However, it is now in a very early stage – he said and added that he sees potential especially in the field of stablecoins.
He added that Visa is currently working with as many as 25 companies in the cryptocurrency market.
– We make it easy to enter your credentials into a system where you can convert your cryptocurrencies into fiat currencies and put the funds in a wallet that can be used wherever Visa is accepted. It is a way of making these funds valuable and useful in our network – he explained.
Even SEC president Jay Clayton already claims that BTC is a payment mechanism and a store of value.
– We can see that our current payment mechanisms, at home and abroad, are ineffective. These inefficiencies are fueling Bitcoin’s rise in popularity … and we’ll see more of that. We will see more regulations regarding the digital payment space – He said.
“We determined that bitcoin was not a security, it was much more a payment mechanism and stored value,” says SEC Chairman Jay Clayton on #btc. “Our current payment mechanisms – have inefficiencies those inefficiencies are the things that are driving the rise of bitcoin.” pic.twitter.com/3r1mxzfgpi
– Squawk Box (@SquawkCNBC) November 19, 2020
All of this shows that cryptocurrencies have become part of the mainstream. The new treasury secretary cannot ignore this. It is possible that she has already changed her mind about BTC.
The beginning of the US problems?
There is one more element in the whole arrangement. Yellen, as mentioned in this text, is an advocate of quantitative easing. In addition, her recent statements in the media suggest that she is much more likely to increase social spending than current Treasury Secretary Steven Mnuchin, who recently sharply criticized several programs designed to stimulate markets during the economic crisis and the COVID-19 pandemic.
So, won’t Yellen’s election as Treasury secretary mean that the U.S. problems will only begin? Already, the Fed’s monetary policy is not kind to frugal citizens. Recall that Charles Evans – the president of the Chicago Fed – recently admitted that zero interest rates will be maintained in the US maybe even until 2024. As we wrote in our text on the gold exchange rate, this sentence is shared by the debt market. Yields on 10-year US government bonds remain below 1%. As a result, long-term real interest rates in the US remain negative.
There is also no indication that Yellen will change this state of affairs. It is even worse: we can count that it will be even more “liberal” in such a policy. What does this mean in practice? First of all, very cheap consumer loans (i.e. – looking to the future – the risk of generating a new real estate or stock bubble) and weakening the purchasing value of the dollar. The latter will not happen immediately, but, for example, in a year or two, when the world begins to forget about the COVID-19 pandemic and again – consoled by the vision that the worst is behind us – will start shopping in shopping malls, car showrooms or real estate agencies. The surge in the turnover of overprinted money in recent months and years on the markets will cause inflation to rise to a level that we believe is unrealistic today.
People with dollars in their accounts will start looking for assets that cannot be artificially printed, as is the case with fiat currencies today. As a result, gold will certainly gain, and maybe … cryptocurrencies. After all, Bitcoin is more and more often considered a safe haven and can gain more on the chart than the precious metal.
As you can see, Yellen’s candidacy is not clear cut when it comes to the digital asset market. It is possible that her policies will make Bitcoin even more prominent in the Wall Street markets.