From the beginning of 2021, crypto markets are in full tear. Bitcoin and Ethereum – two of the largest cryptocurrencies by market capitalization – are growing by 97% and 303% respectively.
A big supporter of the recent success of the emerging crypto industry is the clear paradigm shift; institutional investors no longer view crypto as an unstable, dangerous asset class. From Coinbase’s direct list of leading Wall St. titles to Temasek, Singapore’s state fund for buying Bitcoin, the growing acceptance of these digital assets is obvious.
Of course, there are many factors that led to this rapid institutional adoption, but what has led many corporations to adopt the very class of assets they once avoided? The answer is ultra-low interest rates and rising inflation.
Why the current Federal Reserve’s monetary policy will benefit Crypto
This Wednesday, the Federal Reserve announced that it will keep interest rates at current levels, while continuing to buy assets worth $ 120 billion on a monthly basis.
“Against the backdrop of progress on vaccinations and strong political support, economic activity and employment indicators have strengthened. The sectors most adversely affected by the pandemic remain weak but show improvement. “
With the economic recovery from the pandemic and the rapid growth of money supply, the Fed’s long-term inflation target of 2% is likely in line. “The general financial conditions remain adaptable, in part reflecting policy measures to support the US economy and credit flow,” the central bank said.
This is positive news for crypto markets, as institutions will continue to turn to the digital asset as a hedge against rising inflation and the weakening dollar. As the Fed says its monetary policy will remain “adaptable,” they are unlikely to raise interest rates to fight inflation in the near future.
Corporations such as Microstrategy, Square and Tesla have chosen bitcoin in their balance sheets instead of money. As the US Federal Reserve clears uncertainty and continues to repeat its free monetary policy, the future looks bright for the crypto market.
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