U.S. President Biden will re-nominate Federal Reserve Chairman Jerome Powell for another four years. The news gave Wall Street a sigh of relief. During the turbulent two years under the epidemic, the Fed’s decision to cut interest rates and its measures to support the economy helped the United States avoid a long-term recession, and won Powell praise from professional and amateur investors.
Now Powell faces new challenges. Inflation has accelerated and supply chain disruptions have increased. And the need to reduce some of the help provided during the worst period of the epidemic.
The main responsibility of the Fed chairman is to maintain price stability, guide decisions on when to raise or lower interest rates, and help as many people as possible find employment. Therefore, the actions of the Federal Reserve and Powell’s re-election have affected almost every aspect of Americans’ daily financial lives. From their home buying goals, to retirement savings, to the prices they pay for groceries.
Keith Lerner, chief market strategist at Truist Consulting Services, said that Powell’s re-election marks the continuation of loose monetary policy. He said: “This is good news for people who invest in retirement and 401(K) plans.” But the Fed chairman is just one of many factors that affect the market and investment. He said: “There are also epidemic trends, economic trends, and supply chain factors.”
What impact will Powell’s re-election have on the crypto industry?
In the past two years, the prices of high-risk investment assets such as cryptocurrencies have soared. The reasons are low interest rates, increasing consumer savings and the US government’s stimulus measures.
The price of Bitcoin has almost doubled since the beginning of the year. If Powell delays in raising interest rates, investors may remain enthusiastic about such high-risk investments.
There is also a view that cryptocurrencies can hedge against inflation. Proponents say that due to the limited supply of digital currency, it is different from the U.S. dollar or other traditional currencies.
Said Douglas Boneparth, president of wealth management company Bones Wealth. Without the additional support of the Fed, there is uncertainty about how the market will perform, and the Fed will test the investment portfolio of retail investors.
“This is one of the main tools used to maintain stock market prices. When you take off one of the crutches and see if the economy can walk independently, investors will find out how durable their portfolio is.”
In 2019, Powell publicly called Bitcoin “a speculative store of value, just like gold.” In March of this year, when the price of Bitcoin exceeded $60,000 for the first time, he stated at the Bank for International Settlements Innovation Summit that “Bitcoin assets are highly volatile, so they are not very useful as a store of value.” He concluded Said: “It is essentially a substitute for gold, not a substitute for the U.S. dollar.”
The Fed is studying central bank digital currency (CBDC)
Although Powell does not believe that Bitcoin poses a real threat to the U.S. dollar, it does not mean that he is letting it go on the broader issue of cryptocurrency.
In November 2019, Powell stated to Congress for the first time that the Federal Reserve is studying central bank digital currency (CBDC) for use by businesses and households. The US CBDC, the so-called digital dollar, can use blockchain or other technologies to achieve faster and simpler payments.
But they can also eliminate the need for stablecoins, which are currencies linked to legal tender. Powell stated in July, “If you have a digital dollar, you don’t need stablecoins, and you don’t need cryptocurrencies.”
Powell stated in September that he believes that stablecoins are like money market funds or bank deposits and should be regulated.
Stablecoins are still the source of concerns for Federal Reserve Chairman Gary Gensler and U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler and Treasury Secretary Janet Yellen. They established a working group to initiate a regulatory framework for USD-linked assets. The group called for changes to stablecoins. More supervision.