Did the Fed Just Open the Door to Crypto?
Maybe... plus, some headlines
Jerome Powell, chairman of the Federal Reserve. made some interesting comments during his congressional testimony yesterday. For the record, he was in Washington for his normal visit.
Among the statements:
“It’s possible to have more that one reserve currency.”
“Digital currencies are speculation, like gold.”
He also told Congress that the fed still plans to raise interest rates later in the month in a effort to combat inflationary pressure. Still, he left the door open for a change in policy based on geopolitical shifts.
And all three comments are notable. First, the idea of having more than one reserve currency would have been unthinkable just twenty years ago. The US dollar has been the reserve currency since the end of WWI. It’s one of the key aspects to US dominance in world affairs, as other nations outside the US chose to hold dollars on their balance sheets instead of gold bars or a traditional gold standard. After WWII, the Bretton Woods agreement officially crowned the US dollar king.
Now imagine a world where the dollar shares reserve status with another currency. That’d be different, wouldn’t it? Moreover, what if that second currency somehow becomes Bitcoin?
Powell’s second remark also caught my eye. In that quote he says digital currencies are speculative, but also like gold. And at once, those two statements seem contradictory. Gold is seen as one of the least risky assets in the world, and has acted like store of value for centuries. Speculative is not a world I’d use to describe a gold investment.
So which one is it with regards to crypto?
I suppose we’re about to find out…
Third, the interest rate increase might still happen, but it also might not. A black swan event (Russia’s invasion of Ukraine) is still playing out, along with where the US will fall in terms of involvement. We might choose to get very involved, we might choose to stay limited. It’s not clear, but all of that shakeout will affect the raising of rates. After all, if this country is about to fund a war effort, then cheap and easy money will be required. High (or higher) interest rates might stymie that capital flow.
Powell seems to realize it too. Read more analysis of his comments here.
Plus…
Don’t forget, you can get a discount on tickets to Bitcoin 2022 Miami with my code!
Finally…
The Crypto Connection is for entertainment purposes only and is not meant to be financial advice. Please do your own research before investing in any asset class. Sara Celi is not a financial advisor, and holds several cryptocurrencies. To purchase her books on Amazon, please click here.