Digital Assets on US Federal Reserve’s Radar
More often than not, the reams of paper that make up comprehensive reports from the wood paneled institutional chambers of the United States Federal Reserve Bank do not make for very exciting reading.
On the contrary, the output of administrators, lawmakers and policy officials relating to the traditional capital markets and monetary system in the world’s largest economy is often anodyne and is the last thing that anyone with an interest in the modern economy would show even a modicum of interest in.
Today, however, a relatively different direction has been taken by the bureaucrats, and this time it is of great interest, because for the first time ever, the Federal Reserve has turned its attention to cryptocurrencies.
Even more interestingly, the subject of inclusion in today’s Federal Reserve Monetary Policy Report was not the ongoing development of a digital version of the US Dollar, but the actual cryptocurrencies which dominate the decentralized market including Bitcoin and Ethereum.
The report, which was written by the Federal Reserve’s board of governors said “The surge in the prices of a variety of crypto assets also reflects in part increased risk appetite.”
That is absolutely right. It is very clear that today’s astute investor believes far less in traditional long-term investments which require maximum effort for minimum gain such as pensions or mortgages, both of which require a lifetime’s work and a monthly deduction of a substantial amount of money, only to find that after 45 years of pension contributions via employment and 25 years of mortgage payments, the end result is a small monthly retirement income and a small house which took forever to buy.
Today, the subscription model is well and truly here. Young people are subscribing to everything from music playlists to cars, and soon house subscriptions will be here, and instead of slogging away for a small possible reward after many years of placing their future in the hands of insurance companies and banks, the modern way is to ride the trends set by influencers and have a strong apetite for volatility.
This has now hit home with the Federal Reserve’s policymakers, and their report bears this out, stating that the risk appetite of investors has been kept high by the accelerating pace of economic reopening, the equity market indexes having reached record highs, the ratio of prices to forecasts of earnings remaining elevated, and yields on corporate bonds and leveraged loans remaining low, among others.
This sums up today’s apetite for investments quite accurately.
A definite pattern has begun to emerge with respect to volatile investments and following the trend for volatile asset classes including influencer-driven meme stocks and cryptocurrency, that being the difference in appetite and behavior between the post-Millennials and Generation X and above.
The post-Millennial generation has begun to relish volatility and see it as a means of empowerment, riding the waves which have been created by self-styled market movers like Elon Musk or the Reddit subgroups which have created a decentralized band of self-appointed ‘market makers’ which in turn have been able to create tremendous volatility.
This goes hand in hand with the decentralized nature of financial services and the belief in the complete democratization of the future of finance in that everything, from mining the cryptocurrencies themselves, to creating new methods of adding modern cryptocurrencies to exchanges via staking, something CoinMetro is a pioneer in, right through to influencing the movements in the market.
Quite simply, the future and possibilities are both huge, and the mainstream banks and government bodies know this.
A few years ago, any such mention by the Federal Reserve would have been completely different, but these days the ‘Fed’ understands the dynamic of the modern investor very well.
This leads to the notion that it, along with other central banks, will have to realize that they will need to work alongside the global cryptocurrency community, especially in the advent of the launch of central bank-issued digital versions of major currencies.
It is entirely possible that the central bank, with its newfound accurate assessment of what the current market participants really want, will have to realize that there will come a point at which cryptocurrency users will want to trade Bitcoin or Ethereum against digital dollars or Euros, and will want to do so using comprehensive electronic cryptocurrency exchanges and therefore the monetary system will have to modernize and have policy and procedure in place.
This means accommodating an entire global community which now relishes risk, loves volatility and sees the ups and downs as their method of defining their own future financial independence as well as taking their part in forming the financial markets model of the future.
Gone are the days of bland, low-volatility, plodding asset classes which give those with a long term but small margin plan of saving gradually over a period of years and well and truly here are the days of astute people who are riding the waves of volatility, following influencers or being an influencer, and looking to capitalize quickly.
Given that this is now on the radar of the Federal Reserve, it may be that the United States will begin to fully regulate cryptocurrency exchanges.
It is therefore imperative to be ahead of the curve and work with a regulated cryptocurrency exchange, which engenders sustainability and a cryptocurrency exchange that has been regulated from the outset will be one to continue down the road of development in the exponentially evolving world of digital currency.
It certainly is time to consider that cryptocurrency is now very much a major factor within the mainstream, and will continue to be the forerunner of the methods and instruments used in tomorrow’s world of finance.