Basically, in three months from now, the US Treasury Secretary Janet Yellen will declare how much money they want to borrow. This statement is vital as it affects Bitcoin among other cryptocurrencies too.
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You see, Governments issue bonds when they require more loans, and because bonds are thought of as safer investments than shares or digital currencies like cryptos, they could become less attractive. Nevertheless, if fewer governments were to borrow then this could be positive for riskier assets such as crypto.
There exists a thing called the Treasury General Account (TGA), which is like a piggy bank for the government. When there is lots of money inside TGA, it means banks have less money to lend. However, if some of that TGA money starts getting spent by the government, it puts more money into circulation –– and this can be good for investments.
So during a bit of drama in 2023, when everything was falling apart and they needed to keep things running smoothly, among other things, they started spending money from TGA.
And what do you know?
Cryptocurrencies shot up in value.
Some people who are smarter than me — like Arthur Hayes, who knows a lot about crypto — think that Janet Yellen might do something similar this time around. He thinks she might stop selling long-term bonds or start selling shorter-term ones instead. That could flood the economy with cash and make cryptocurrencies worth more dollars.
There’s also something identified as “reverse repurchase agreements” (RRP), which is the moment at which the government borrows money from banks temporarily. As of now, there is a huge amount of excess cash due to this. But if fewer borrowings are made by the government, it might change.
All this may be somewhat puzzling, so here’s what it all comes down to: how the government uses its money can greatly affect cryptocurrencies such as Bitcoin. Therefore, it’s definitely worth watching if you’re into trading crypto like myself.
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In summary, although these U.S Treasury announcements may not appear significant initially; they indeed can have quite an impact on the crypto market overall. So next time Janet Yellen speaks up ― keep your ears open because she might just announce something really big for investments!
Posted Using InLeo Alpha