A crypto billionaire says the Fed is to blame for the current downturn in the cryptocurrency market. He argues that the recent rate increase is a result of the fear of contagion to the wider financial system, and the fallout from that decision could have an impact on the future of crypto regulation. The article goes on to discuss how this fallout could impact crypto regulation. The bottom line is: If the Fed does not make any significant changes, the current situation could get worse.
Crypto billionaire says Fed is responsible for the current downturn
Sam Bankman-Fried, CEO of the FTX platform, says the Federal Reserve is to blame for the market’s recent downturn. Fed rate hikes have recalibrated risk expectations and sent cryptocurrencies into full meltdown mode. While Bankman-Fried acknowledges that it is difficult to make such policy decisions, he says his company’s future depends on Fed policy.
According to the survey, one-quarter of investors now own Bitcoin. Another 55% of them began investing in crypto assets just a year ago. Some investors parked their money in cryptocurrency lenders. This has resulted in a chaotic situation that fuels concerns of financial system contagion. While many of these investors are desperate to cash in, many are unable to. Crypto companies have been looking for cover, and investors like Bankman-Fried and larger companies like FTX have been stepping up to help contain losses.
Fear of contagion to broader financial system
Many people in the cryptocurrency community are concerned about the Federal Reserve raising interest rates. That fear has fueled a selloff in cryptocurrencies. However, Bankman-Fried said he understood the difficulties of central bank policy, but he viewed the current downturn as a “twin peg.” The current downturn in the cryptocurrency market is a result of recent Fed announcements about the risk of contagion to the broader financial system.
One of the most widely held misconceptions about crypto is that it will cause contagion to the broader financial system. This is a myth. The crypto industry has plenty of reasons for being pessimistic. Nonetheless, there is no evidence to suggest that a crypto dip is a signal of contagion. FTX CEO Peter Thiel is one such person. He runs the FTX website and app, a popular destination for investors to buy and sell digital currencies.
Another myth about cryptocurrency is that it has an outsized psychological effect compared to other assets. As a result, a decline in cryptocurrency value will have a negative impact on other financial markets. The crypto market is now worth less than $1 trillion, a fraction of what it was in 2007 when the financial crisis hit. In the wake of this fear, other cryptocurrency companies have paused or even suspended account withdrawals.
Fallout could shape crypto regulation
Recent events in Washington have resulted in increased scrutiny of the cryptocurrency industry. And one investor suggested that the fallout may shape crypto regulation. While regulation in the US is still being debated. Increased scrutiny of leverage and transparency about the risks in the crypto industry is inevitable. This increased scrutiny will lead to greater cover for the crypto companies. And investors like Bankman-Fried and larger companies like FTX may help in containing losses.
Meanwhile, in the House, Republicans are poised to take control of the chamber in 2023, and unlike Democrats, they do not share concerns about the crypto learning industry’s risks. In fact, Rep. Patrick McHenry, a Republican, is poised to chair the committee if the Republicans regain control of the House. He wants to make sure that the cryptocurrency revolution is a U.S. phenomenon. However, bank lobbyists have urged lawmakers to apply the same level of regulatory scrutiny to crypto startups as they do to traditional lenders.
