- Federal Reserve Vice Chair for Supervision on Thursday discussed the potential of the technology behind crypto that can be harnessed only with guardrails in place.
- Earlier this week, Fed Chair Jerome Powell also reiterated the need for a legal framework for crypto activities.
- Bitcoin price has declined by more than 4% in the last three days to trade below $21,500
The crypto market has been considerably impacted this week following Federal Reserve Chair Jerome Powell's hawkish comments on Tuesday. Most recently, Fed’s Vice Chair for Supervision and FOMC member Michael S. Barr provided more information on the Fed's standing regarding crypto and similar digital activities.
Federal Reserve is optimistic about crypto
In a speech at the Peterson Institute for International Economics, Fed’s Vice Chair for Supervision, Michael S. Barr, discussed the Federal Reserve's Approach to Supervision and Regulation of Banks’ Crypto-related Activities. Barr discussed the recent crypto winter and provided insight into the central bank's notion regarding digital assets.
Barr stated that despite the recent disappointing run that the crypto market observed, the central bank is still optimistic about blockchain technology. The policymaker said,
"Despite recent events, we have not lost sight of the potential transformative effect that these technologies could have on our financial system… But the benefits of innovation can only be realized if appropriate guardrails are in place."
While Barr did not explicitly provide information as to what guardrails can be implemented, he did speak about the advances the Fed has been making on that front.
The legal scholar stated that the Fed has been working with other federal bank regulatory agencies to provide clarity and guidance on what is permissible, safe and sound, and compliant with anti-money laundering and anti-terrorist financing laws. He added that the central bank is also working with its international counterparts to minimize the possibility of regulatory arbitrage across jurisdictions.
Regarding banks’ engagement with crypto, Barr said the Fed’s overall stance is that, at this stage, “banks should take a careful and cautious approach to engaging in crypto-asset related activities and the crypto sector.”
Towards the end of the speech, Barr noted that going forward, the Fed would be providing additional clarity on its views of risks and effective risk management practices across a range of crypto-related activity.
Earlier this week, Fed Chair Jerome Powell also discussed crypto quite briefly. Testifying on Capitol Hill, Powell said,
"I do think it would be important for us to have a workable legal framework around digital activities. That is important, and something Congress in principle needs to do because we can't really do that."
Bitcoin price takes a dip
Following Powell's comments regarding the possibility of higher interest rate hikes in the future, the crypto market plunged. Bitcoin price subsequently posted red on the charts, with the biggest cryptocurrency dropping to trade below $21,500.
At the time of writing, BTC could be seen changing hands at $21,452, treading right at the cusp of falling through its critical support at $21,410.
BTC/USD 1-day chart
This price point also coincides with the 100-day Exponential Moving Average (EMA). Losing this support could trigger a potential 14% crash, bringing the price to $18,289.
The cryptocurrency could invalidate this bullish thesis if it bounces off the critical support and rallies beyond $23,782. Breaching this critical resistance would allow Bitcoin price to recover to year-to-date highs of $24,760, providing room to initiate a sustainable rally.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Polygon joins forces with WSPN to expand stablecoin adoption
WSPN, a stablecoin infrastructure company based in Singapore, has teamed up with Polygon Labs to make its stablecoin, WUSD, more useful in payment and decentralized finance.
Coinbase envisages listing of more meme coins amid regulatory optimism
Donald Trump's expected return to the White House creates excitement in the cryptocurrency sector, especially at Coinbase, the largest US-based crypto exchange. The platform is optimistic that the new administration will focus on regulatory clarity, which could lead to more token listings, including popular meme coins.
Cardano's ADA leaps to 2.5-year high of 90 cents as whale holdings exceed $12B
As Bitcoin (BTC) gets closer to the $100,000 mark for the first time — it crossed $99,000 earlier Friday — capital is rotating into alternative cryptocurrencies, creating a buzz in the broader crypto market.
Shiba Inu holders withdraw 1.67 trillion SHIB tokens from exchange
Shiba Inu trades slightly higher, around $0.000024, on Thursday after declining more than 5% the previous week. SHIB’s on-chain metrics project a bullish outlook as holders accumulate recent dips, and dormant wallets are on the move, all pointing to a recovery in the cards.
Bitcoin: Rally expected to continue as BTC nears $100K
Bitcoin (BTC) reached a new all-time high of $99,419, just inches away from the $100K milestone and has rallied over 9% so far this week. This bullish momentum was supported by the rising Bitcoin spot Exchange Traded Funds (ETF), which accounted for over $2.8 billion inflow until Thursday. BlackRock and Grayscale’s recent launch of the Bitcoin ETF options also fueled the rally this week.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.