The Federal Reserve’s (Fed) war on inflation is pushing Bitcoin’s price down, says Bitfury CEO Brian Brooks.
According to the Bitfury boss, traders don’t perceive BTC as a major inflation hedge in times of extreme fiscal tightening. Because of this, hodlers can expect the price of BTC to remain relatively low, at least in the short term.
In a brief but pointed interview with CNBC on Aug. 29, Brooks also criticized the SEC for its cantankerous handling of the crypto industry, saying regulators need to “get serious” and offer proper guidance rather than go to court.
fighting inflation
US inflation is currently at 8.5%, slightly below its recent 40-year high of 9.1% in July, but still well above the 2% target rate. Until recently, there was a widespread belief in the cryptosphere that deflationary assets like Bitcoin would do well in such a hyper-inflationary environment.
In recent months, however, this theory has been put to the test and found to be flawed. Bitcoin’s price is hovering around $20,000 today, down 60% from a year ago.
According to Brooks, the Fed’s aggressive response to high inflationary pressures has cooled the market.
“We talked about the idea that bitcoin is an inflation hedge,” Brooks told CNBC. “The more the market expects tough policy from the Fed, the more people believe the Fed will maintain an aggressive stance, and that would tend to hurt Bitcoin.”
Since the beginning of the year, the Fed has pursued a policy of aggressively tightening financial markets and raising the cost of borrowing through interest rates. At the beginning of 2022, interest rates were close to zero. The Fed raised interest rates by 0.25% in March, 0.50% in May, 0.75% in June and 0.75% in July. Overall, interest rates have been raised by 2.25% since the beginning of the year.
Another reason for Bitcoin’s perceived underperformance could be due to the type of inflation the current market is facing. According to Swan Bitcoin’s Steven Lubka, BTC only performs well in inflationary environments caused by the currency’s devaluation, or in layman’s terms – money printing. Currently, most of inflation is being driven by supply chain disruptions and shortages of key commodities like wheat and oil.
Be serious guys
While Brooks didn’t mince words about the Fed and its economic policies, most of his anger seemed reserved for the Securities and Exchange Commission (SEC).
Brooks was particularly upset with the SEC’s approach to regulation in the cryptosphere, which has little actionable guidance and lots of litigation. This has also hurt bitcoin and the broader market.
“Regulation doesn’t mean suing people, and the SEC’s approach over the last few years has been not to tell anyone the rules up front, but to sue people after they start a project, form a company or list a token, and then people do it prompted to deduce the rules later. This is not a good thing, and at some point Congress and regulators need to seriously start telling people, ‘What’s the speed limit on the crypto highway?’” Brooks said.
Brooks’ words appear to echo similar statements made by Superintendent Adrienne A. Harris of the New York State Department of Financial Services (DFS). In June, Harris, a savvy politician who has stated her intention to work towards a fairer crypto regulatory landscape, stated on record, “We should have transparency about what the rules of the road are,” and move away from “regulation by enforcement.”
Should such an environment ever be encouraged, Brooks wouldn’t be the only member of the crypto community to celebrate. For now, the guesswork continues.
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