Fed's Action Triggers Prediction of $1 Million Bitcoin by Arthur Hayes
The Federal Reserve is preparing markets for a potential shift in monetary policy, with the possibility of implementing Yield Curve Control (YCC) being discussed in a recent Bloomberg report. This development has caught the attention of Bitcoin enthusiasts, who believe it could significantly increase the cryptocurrency's value.
The Bloomberg report, titled "Fed 'Third Mandate' Forces Bond Traders to Rethink Age-Old Rules," was published ahead of this week's policy meeting of the Federal Reserve. The report documents how traders are re-pricing duration risk in light of the political context surrounding the Fed and the recent confirmation of economist Stephen Miran to the Fed's Board of Governors.
Stephen Miran's confirmation, which occurred ahead of the policy meeting, has given more weight to the "third mandate" narrative. The Fed's statutory goals include promoting maximum employment, stable prices, and moderate long-term mortgage rates. Miran's remarks about "moderate long-term interest rates" have added fuel to the speculation that the Fed might more actively shepherd long-term rates.
Arthur Hayes, a well-known figure in the Bitcoin community, has agreed with this framing. In a comment posted on X late Monday, Hayes argued that the mere acknowledgment of the path towards YCC is the "trigger" for Bitcoin. Hayes's comment also contained the phrase "LFG! YCC -> $BTC = $1m," where "LFG" stands for "Let's F***ing Go."
Several market voices, including Bitwise CIO Matt Hougan and Macro investor Lawrence Lepard, have agreed with Hayes's assessment. They believe that the US Federal Reserve's preparation for YCC could lead to a significant increase in Bitcoin's value.
Yield curve control targets specific yields on medium- or long-dated Treasuries, enforcing caps with unlimited buying if needed. This framework has been used in Japan since 2016 and briefly in Australia. If implemented, it could lead to lower long-term mortgage rates, which could in turn boost the appeal of riskier assets like Bitcoin.
At press time, BTC traded at $116,694, reflecting the market's anticipation of this potential shift in monetary policy. As the Fed's September meeting approaches, the debate over whether the institution will ultimately be pushed to control long-term mortgage rates has moved from fringe threads into mainstream coverage.
However, it's important to note that the Bloomberg report did not declare YCC policy imminent. It simply documented the re-pricing of duration risk by traders in light of the political context and Miran's remarks. Nonetheless, the possibility of YCC has sparked excitement in the Bitcoin community, with some believing that the macro event leading Bitcoin to $1 million has occurred.
In June, Mel Mattison highlighted that keeping long-term interest rates "moderate" is just as much part of the Fed's mandate as price stability and unemployment. As the Fed considers this shift in policy, the impact on financial markets, including Bitcoin, remains to be seen.
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