After the biggest money-printing episode in recorded human history, it appears that central bankers are realizing the limits of quantitative easing.The Federal Reserve (Fed) has indicated that they are planning to raise interest rates when it meets on September 20–21.Federal Reserve Chair Janet Yellen suggested that September and December rate hikes are on the table.Some analysts expect the Federal Funds rate to increase by 0.50 percent by year end.Apart from banks and insurance companies, rising rates are not generally welcomed.Non-financial corporates have gorged on free money to complete stock buybacks and M&A deals.Higher borrowing costs will be disastrous for their highly leveraged balance sheets.That is why equity indices react negatively to any hint that the punch bowl will be removed.Bitcoin dances to the beat of the People’s Bank of China (PBOC).The PBOC is staring at a banking system collapse of epic proportions.The amount of credit extended in the past eight years dwarfs the amount extended during the U.S.

subprime mortgage crisis by multiples.As long as the Fed keeps rates low, the PBOC is able to quietly and slowly deleverage China’s collective balance sheet.A stronger USD makes Chinese goods more expensive globally.It also encourages more capital flight into a “safer” and stronger currency.Each day at 9:15 am Beijing time, the PBOC sets the USD-CNY onshore exchange rate.Since August 2015, any time the Fed has hinted at or raised rates, the PBOC has accelerated the devaluation of the Yuan.A devaluing Yuan signals that the global economy is not well, and deflation is being exported by the workshop of the world.That is not positive.As a result, during periods of Yuan depreciation, global equity markets fall.Through quantitative easing, the Fed attempts to push American savers and corporates into the equity markets.Due to the lack of positive risk-adjusted and inflation-adjusted yielding assets, savers and corporates have responded correctly.The S&P 500 is at all-time nominal highs, and the U.S.

equity market is one of the best performing globally since the global financial crisis of 2008.Given that S&P 500 companies earn a significant portion of money internationally, a faltering China signals global malaise.As such, the index trades violently lower.A falling S&P 500 is what the Fed fears most.It forces the same savers and corporates to dump shares in favor of cash.This cash will sit in a bank account, and the demand for credit will fall.ethereum the economistAfter a sufficient fall in the S&P 500, the Fed typically relents and proclaims due to “market forces” the time just isn’t right for a rate hike.bitcoin good hashrateThe PBOC then halts the devaluation, and the game continues into the next quarter.programa para fazer bitcoins

Yellen’s Jackson Hole remarks in August were very hawkish.The rhetoric was subsequently backed up by various Fed governors during public speeches.The PBOC noticed and began weakening the Yuan toward 6.70.If the hawkish rhetoric translates into action, the PBOC will allow onshore USD-CNY and offshore USD-CNH to trade much higher (the higher the level, the weaker the Yuan).Bitcoin reacts positively to a weaker Yuan.The market believes that the Fed’s threats to raise rates are credible.bitcoin opisTraders are attempting to front run the PBOC using offshore CNH to short the Yuan.ethereum currency converterIn response, the PBOC has instructed state-owned Chinese banks to restrict lending of CNH in order to drive up the cost of funds.702 bitcoinAnyone who wants to short CNH will usually borrow it from one of the large Chinese banks.ethereum power consumption

If the interbank CNH rates become prohibitively expensive, shorts are forced to cover.Watch USD-CNH: The PBOC has been defending 6.70 in the offshore market.If they allow that level to be breached, it means they are willing to tolerate a much weaker Yuan.The best hope for a retaking of $700 and then $800 is for the Fed to raise rates next week.However, if the S&P 500 nosedives before the meeting, the Fed will not hike, and then all attention will shift to the December meeting.coin slot bitcoinThis guest post will also appear on the BitMEX Blog.fund bitcoin wallet with debit cardThe views expressed are those of the author and not necessarily those of Bitcoin Magazine.On March 3, Federal Reserve Chair Janet Yellen announced at the Executives’ Club of Chicago that the Fed is likely to increase interest rates later this month.As a result, Bitcoin price is also likely to increase, as the value of reserve currencies including the Japanese yen and Chinese yuan falls.

When the Fed increases its rates, the value of the US dollar naturally increases.Even with a speculation or a forecast from the Federal Reserve, the value of the yen, yuan and the Korean won would fluctuate.“We currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect.Indeed at our meeting later this month, the committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations.In which case, a further adjustment of the federal funds rate would likely be appropriate.” Already the Fed announcement is starting to affect the value of the Japanese yen, a currency which has shown more resilience to the increasing Fed rates in comparison to other currencies.The year-to-date (YTD) return of the Japanese yen against the USD is -2.5 percent and is likely to increase in the upcoming weeks as the Fed prepares to increase interest rates.Currently, the Japanese Bitcoin exchange market controls over 52 percent of the global Bitcoin exchange market.

China, Europe and South Korea make up the top five largest Bitcoin exchange markets, right below the US.When the Fed decides to increase rates again later this month, it will lead to the devaluation of the yen, yuan and euro as the dollar strengthens.If these currencies begin to devalue, high profile investors and traders will seek for alternative safe haven assets and stores of value such as Bitcoin or gold that are detached from the general monetary system.Traders who consider Bitcoin as a wealth protection and management product, which is the vast majority of Bitcoin users as of current, will move onto Bitcoin in order to protect their assets from devaluation.Based on the current Bitcoin price trend, it is likely that Bitcoin price could reach $1,300, especially as it nears the final approval date of the Winklevoss Twin’s Bitcoin ETF COIN.Analysts also predict that Bitcoin price will reach new highs if the rising Fed rates and the March 11 approval of the COIN ETF coincide.In particular, the approval of the COIN ETF will immediately open the Bitcoin market to mainstream investors and investment funds, which are expected to exponentially increase the market size of Bitcoin by hundreds of millions and even up to billions of dollars.