Experts in cryptocurrency warn that political pressure on the US Federal Reserve could cause prices to change, but it could also cause more money to flow into Bitcoin and gold over time.
Leaders of central banks around the world have backed US Federal Reserve Chair Jerome Powell, saying that political pressure on the Fed might threaten financial and economic stability around the world.
On Tuesday, governors from 11 major central banks released a joint statement saying they “stand in full solidarity with the Federal Reserve System and its Chair Jerome H. Powell.” They also stressed how important it is for central banks to be independent.
The comment comes after US officials started a criminal investigation into Powell over a $2.5 billion refurbishment of the Fed’s headquarters. This has made things even worse between the central bank and the Trump administration.
Christine Lagarde, president of the European Central Bank, Andrew Bailey, governor of the Bank of England, Tiff Macklem, governor of the Bank of Canada, and presidents of the central banks of Sweden, Denmark, Switzerland, Norway, Australia, South Korea, and Brazil are among those who have signed. The statement was also signed by high-ranking officials from the Bank for International Settlements.
Crypto market implications of central bank interference
Pressure from the Fed might make things more volatile and raise the price of Bitcoin. Farzam Ehsani, the CEO of the cryptocurrency exchange VALR, claimed that the scenario is sending contradictory signals to the markets for digital assets.
Any attempt to influence politics hurts investor trust. He went on to say that for cryptography, a lack of trust in the dollar’s policy might make decentralised assets more appealing. However, rapid political shocks can also make prices more volatile and cause short-term outflows from risk assets.
Ray Youssef, CEO of the crypto app NoOnes, said that gold and silver prices have gone up as the dollar has gone down. This means that investors are moving into what they see as safe havens.
A rate cut could make more money available and help crypto prices. But for now, the market is still fragile. Bitcoin is under selling pressure during US trading hours, even though there is longer-term interest.
Source: Elizabeth Warren
Trump-aligned candidates emerge as potential Powell successors
Donald Trump, the President of the United States, has put together a group of devoted loyalists who may take Powell’s place. Many of them have publicly backed lowering interest rates. Kevin Hassett, a prominent economic adviser to Trump and widely seen as the leading candidate, has claimed that Trump’s personal opinions on rates would not directly affect the Fed’s decisions.
The government has already made its power stronger at the central bank. Last year, Stephen Miran, who is very close to Trump, was named to the Fed’s board of governors. At his first meeting in December, Miran pressed for a 0.5% drop in interest rates. This was an early sign that Trump-aligned officials were becoming more dovish.