Jerome Powell Says Federal Reserve Allows Banks to Serve Crypto Clients
In an interesting development, Bitcoin and crypto markets experienced a notable uptick today following comments from U.S. Federal Reserve Chair Jerome Powell during the latest Federal Open Market Committee (FOMC) meeting. The conference saw the Fed decided to maintain the federal funds rate at a steady 4.25% to 4.50%, a decision that was broadly anticipated given the context of "somewhat elevated inflation."
Bitcoin's price began to edge upward almost immediately after the release of the FOMC minutes. This trend gained momentum as the day progressed, propelling Bitcoin's value above $103,500 by the U.S. evening trading session. The positive movement in Bitcoin's price came directly after Powell's statements regarding the relationship between banks and the fast growing crypto industry.
Powell clarified that U.S. banks are "perfectly able" to cater to cryptocurrency clients if they adhere to existing risk disclosure requirements. His comments were a direct response to concerns about banks debanking clients involved in the crypto space, often referred to as "Operation Choke Point 2.0". Powell's assurance that de-banking lawful customers is not part of Fed policy provided a sense of relief and optimism within the crypto community.
Impact on Market Sentiment
Following these remarks, the digital asset market saw a green wave, contrasting with the slight decline observed in major U.S. equity indices. The unchanged interest rates created a divide among market participants. Bulls have argued that Bitcoin might witness another February surge, citing historical data where Bitcoin has increased in value in eight out of the last twelve Februaries. Additionally, they pointed towards potential support from President Donald Trump's known pro-crypto stance, which could further bolster the market.
Conversely, the bears maintained that without a change in interest rates, there might be less incentive for investors to inject new capital into Bitcoin and related financial products like spot Bitcoin ETFs. This perspective reflects concerns over the attractiveness of cryptocurrencies when traditional finance offers competitive yields.
Amid these discussions, there were whispers that President Trump had been pressing Powell and the Fed for lower interest rates. However, Powell refuted having any direct communication with Trump on this matter, leaving the speculation unconfirmed and the market to interpret these developments as they unfolded.