Bitcoin Bounces Back to $55K as Yellen Backtracks on Rate Hike Comments

[Cristiano]

Bitcoin has regained poise on Wednesday after U.S. Treasury Secretary Janet Yellen toned down comments suggesting interest rate hikes may be needed to stop the economy from overheating.

“It’s not something I’m predicting or recommending,” Yellen clarified during an online event hosted by The Wall Street Journal late on Tuesday, downplaying remarks made earlier in the day.

“If anyone appreciates the independence of the Federal Reserve, I think that person is me,” Yellen added, according to a Bloomberg report Wednesday.

Bitcoin found a floor near $53,000 after Yellen’s clarification and was trading back above $55,400 at press time, representing a nearly 4% gain on the day.


Yellen had originally been discussing the scope for rate hikes in the context of U.S. President Joe Biden’s plans for $4 trillion of infrastructure and welfare spending over the next decade.

“It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat, even though the additional spending is relatively small relative to the size of the economy,” Yellen said at an event organized by The Atlantic magazine.

Catching financial markets off-guard, the remarks intensified fears that an early unwinding of liquidity-boosting stimulus measures might push bitcoin, stocks and other assets lower. The Federal Reserve cut rates to a record low of 0.25% a year ago and has been buying bonds worth $120 billion every month to contain the coronavirus pandemic’s impact on markets and the economy.

Bitcoin, often touted as digital gold, has been one of the primary beneficiaries of the Fed’s massive inflation-boosting stimulus measures launched in March 2020. The cryptocurrency has charted a six-fold rally over the past 12 months.

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