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How will rising rates affect bitcoin?

How will rising rates affect bitcoin?

The European Central Bank (ECB) raised its key rate by 0.75%, bringing it down to 1.25%. But is this really bad for bitcoin?

Double digit inflation soon?

Inflation was at 9.1% from August 2021. This historic increase is largely linked to the rise in energy prices (+38%).

For Christine Lagarde, the price of oil should be “moderately “, although wholesale gas prices will remain “extremely high. »

Food price inflation also rose to 10.6% year on year, which shows “rising input costs partly related to energy”.

The depreciation of the euro is also involved. The euro has fallen 12% against the dollar since the start of the year. This depreciation weighed on inflation due to the “Most of the energy is denominated in dollars”.

Christine Lagarde ended her press conference with these words, as if reminding that the protection of the petrodollar is not related to the fact that the ECB is obliged to raise its rates so quickly.

ECB: False forecasts

ECB staff forecasts suggest that inflation will average 8.1% in 2022, 5.5% in 2023 and 2.3% in 2024. These numbers mean little, and many journalists have not hesitated to mock the ECB regarding its projections which are still way off the mark.

If relations with Russia deteriorate, these forecasts will quickly disappear. Especially since the G7 is preparing to no longer pay for Russian oil above a certain price. The risk is that Russia will stop exporting with an explosion in pump prices this winter.

However the President of the ECB warned that a “A protracted war in Ukraine remains a significant risk to growth, especially if businesses and households face the rationing of energy supplies. “Energy and food costs may remain permanently higher than expected. »

What impact on bitcoin?

The whole question is whether the rise in the cost of money will actually curb inflation. The strategy is to reduce the amount of money that can be borrowed in order to reduce the amount of money in circulation, and therefore demand.

If Christine Lagarde has shown that she is resolute in her objective of returning inflation to 2%:

However, the ECB President suggested that rates should not be raised within four to five months. At the rate of 0.75% per month, the prime rate will then be between 4% and 5% at the beginning of next year.

Will this be enough to reduce energy prices. Probably not…

Especially since governments are borrowing like never before. The ponzi continues to roll its debt. Not to mention the likely peak oil crossed in 2019…

Energy scarcity, whether physical or geopolitical, can only lead to inflation. Furthermore, rates cannot remain high for very long without triggering an economic depression and an exponential flight of public debt.

Inflation is inevitable and the short-sighted posture of central bankers will not change that. Running bull for this winter?

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Nicolas Teterel avatar
Nicolas Teterel

Journalist reporting on the Bitcoin revolution. My papers deal with bitcoin through geopolitical, economic and libertarian prisms.

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