The Fed’s ‘No’ to Bitcoin causes a sharp decline in Crypto Market
The Crypto market took a sharp downturn as the U.S. Federal Reserve (Fed) signaled plans to slow the pace of monetary easing next year after cutting interest rates by an additional 0.25% (25 basis points). Previously, investors had anticipated a similar rate cut and focused their attention on the Fed’s monetary policy statement and press conference for clues about future policy directions.
Economic growth remains solid, unemployment is low, and inflation is rising moderate.
This has raised doubts about whether the Fed will stop cutting rates during the next meeting at the end of January 2025. For the upcoming year, Fed officials expect to lower rates only twice, with each cut being 25 basis points.
When asked about the idea of the U.S. government establishing a strategic Bitcoin reserve under Donald Trump’s presidency, Fed Chairman- Jerome Powell clarified that the Federal Reserve “is not permitted to own Bitcoin” under the Federal Reserve Act. He emphasized that the Fed has no intention of amending the law to engage in building a digital asset reserve as proposed.
Previously, Donald Trump announced plans to create a strategic Bitcoin reserve for the U.S. and expressed ambitions to make the country a leader in digital currencies. However, he has yet to provide specific details beyond suggesting that the initial holdings could include Bitcoin confiscated from criminals. Analysts have recently highlighted that such a plan would likely face strong opposition from the Fed.
Experts remain skeptical about the stance of monetary authorities on digital assets. Powell reiterated that the Fed’s focus is on regulating and supervising banks. “We want the interaction between crypto businesses and banks to avoid jeopardizing the health of financial institutions,” he said in early December. The Fed Chair also emphasized that the agency “does not regulate cryptocurrencies directly.”
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