The US Federal Reserve (Fed), as one of the most powerful financial institutions known for its decisive influence on the global economy, has recently entered a process of significant leadership change. The approach of the Fed’s new administration, especially towards cryptocurrencies and Bitcoin, is being followed carefully in the market.
The emphasis on “digital gold” comes to the fore in the new administration
Many names on the Fed’s board of directors have shown that they have a positive approach to Bitcoin in their past statements. One of these members, Kevin Warsh, still serves as the president of the institution and thinks that Bitcoin has become the “new gold” for the new generation. Warsh is known for his statements emphasizing that Bitcoin plays a safe haven role, especially for investors under the age of 40.
Another board member, Christopher Waller, defines Bitcoin as “electronic gold” and highlights the value storage function of cryptocurrencies. According to Waller, Bitcoin offers a digital alternative to traditional precious metals.
In the board, Jerome Powell, who served as the Fed chairman in recent years, also made statements in favor of Bitcoin from time to time. Although Powell stated that Bitcoin is a speculative asset at the New York Times DealBook Summit, he compared the leading cryptocurrency to gold by saying, “They often use Bitcoin as a speculative asset; like gold, but virtual, digital.”
Stating that Bitcoin is used as a speculation tool and is considered a digital asset similar to gold, Powell offered an assessment that goes beyond the traditional perspective.
Some members of the administration take a more cautious approach. Michelle Bowman, Philip Jefferson and Lisa Cook; They are averse to cryptocurrencies, but they do not completely reject blockchain technology.
Michael Barr, the Fed’s head of financial regulations, stands out as the most prominent skeptic among the group. Barr publicly warned against risks from stablecoins last year.
Economic agenda overshadows crypto markets
The overall Fed administration has the most positive attitude towards Bitcoin to date. In particular, the frequent repetition of the “digital gold” analogy by board members leads to comments that the new era may be crypto-friendly. Nevertheless, global economic conditions continue to play an active role in determining the course of cryptocurrency markets.
Recently announced inflation data was higher than expected. This situation weakened the possibility of an interest rate cut in the near term. According to market expectations, investors expect a 60 percent probability that the policy rate will increase by another 25 basis points at the January meeting of the Federal Open Market Committee (FOMC). Such an increase could create a negative atmosphere for crypto markets.
Bitcoin, in particular, is extremely sensitive to global liquidity conditions. The resurgence of interest rate increases may increase the downward pressure on cryptocurrencies, especially Bitcoin.
