Experts React to the Fed’s Digital Currency Report and Falling Prices for Bitcoin and Ethereum. Here’s What Investors Should Know

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It’s official: the Federal Reserve is toying with the idea of ​​issuing US digital currencies.

In a long-awaited report released Thursday, the Federal Reserve investigated the costs and benefits of government-issued digital currencies, but postponed the final decision on whether to move forward. Instead, the Fed seeks to share its views with the general public and other stakeholders until May 20 before taking further action.

Unlike cryptocurrencies, which are usually created within the private sector and have significant price fluctuations on a regular basis, Central Bank Digital Currency (CBDC) is a digital form of cash issued and backed by the Central Bank of the United States. But according to Grant Maddox, a certified financial planner and founder of South Carolina-based Hampton Park Financial Planning, the Fed’s next move could “enhance or undermine its value.” There is. “It depends on which direction our government chooses to take,” he adds.

The Federal Reserve said in a report that it would not proceed with issuing a CBDC “ideally in the form of specific licensing laws without explicit support from government agencies and Parliament.”

The Federal Reserve is trying to be a “policy expert” due to the weight of the digital dollar, says Salman Bannai, North American public policy officer for crypto data firm Chainalysis. If the Fed had taken a clear position on the issue, “it would have received a lot of political backlash,” Bannai says.

A few hours after the report was released, the price of Bitcoin and Ethereum fell below the second previous record price this month. Bitcoin price hasn’t been this low since July, and Ethereum hasn’t been this low since August.

“There are two main factors affecting the current demand for cryptocurrencies: value as a hedge against inflation and value as a risk asset,” Banai says. “The ability to identify cryptocurrency futures also fluctuates based on regulatory risks.”

The experts will explain what the experts have to say about this week’s report and what investors should do with it.

What experts say about the Fed’s report

Salman Bana Rai

impression: Head of North American Public Policy for Crypto Data Corporation Chainalysis

interaction: “What surprised me is how seriously the Fed is taking the concept of CBDC. The crypto industry is excited to see this happen. Infrastructure designed to support the crypto industry. Many structures can easily integrate CBD into existing providers, but the timeline for CBD is It will be much longer. By the time we reach the next master teacher, 2-4. I think it will take years.”

Laura Shin

impression: Host of the Unchained Podcast and author of The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze

interaction: “It is no wonder that the Federal Reserve is looking for a central bank digital currency, because blockchain technology is still in development, but it has many advantages over existing analog systems. In addition, the US dollar is the world’s preparedness. It may help maintain the state of the currency It appears that China is already taking advantage of the digital yuan to position the US dollar as the world’s reserve currency.Central bank digital currencies are considered a safety and it is not surprising that the Federal Reserve is not ready to announce its decision, as it can raise many questions about privacy and confuse existing financial institutions , but we are currently seeking feedback.”

Grant Maddox

impression: Founder of CFP and Hampton Park Financial Planning

interaction: “They are catching up with things like China and others that have advanced in the blockchain. US digital currencies can enable faster payments to foreign allies and improve geopolitical expectations. This move has the potential to improve monetary policy decisions by allowing for easier distribution. We are involved in about 90 other countries studying this. Option. This addition could further complicate the global market and distract from the dollar.”

Chris Chen

impression: Founder of CFP and Insight Financial Strategists

interaction: “There are still many applications in the blockchain that do not have to be a currency, so there is still a lot to do in the private sector. I don’t think a self-respecting government will give control of its currency to the private sector. I am sure. Governments need to maintain control of the Money supply and interest rates. Like it or not, these are the main tools for managing the economy. Consider digitizing currency. The United States is not the only country in the world. Like many other countries, China is on the way.”

What does the report mean for cryptocurrency investors?

Crypto investors may not need to change immediately based on this week’s Federal Reserve report, but policy makers are paying attention to how perceptions of cryptocurrency are formed. Please remember.

“The Fed move means that people who have been thinking of cryptocurrency as real currency are going to burst the bubble,” says Chen. “Many types of bitcoin thought it was a currency and would replace traditional currencies. Well, the Fed, the European Central Bank, and other central banks have something to say about it. If that’s the case, that’s not the case.”

The basics of investing in cryptocurrency remain the same. Experts say they need to stick with two major cryptocurrencies, Bitcoin and Ethereum, and invest those coins that are OK to lose less than 5% of their entire investment portfolio. We always prioritize important aspects of our finances, such as emergency savings, paying off high-interest debt, and retirement savings, over investing in cryptocurrencies. Where to buy and trade cryptocurrency Stick with the large number of mainstream cryptocurrency exchanges that actively comply with cutting-edge federal and state regulatory agencies such as Coinbase and Gemini.

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