Federal Reserve Official Changes Stance on Bitcoin Amid $3 Trillion Crypto Surge
Bitcoin has experienced a significant surge following Donald Trump's decisive victory in the U.S. presidential election, with the cryptocurrency nearing a monumental milestone of $100,000 per bitcoin. This surge has contributed to the overall crypto market cap exceeding $3 trillion for the first time since 2021, marking a pivotal moment for digital currencies.
In light of these developments, Tesla's billionaire and Trump advisor, Elon Musk, has issued a stark warning regarding potential U.S. bankruptcies. Meanwhile, Neel Kashkari, the president of the Minneapolis Federal Reserve, has notably softened his previous harsh criticisms of bitcoin and cryptocurrencies.
Kashkari, who has previously labeled bitcoin as "worthless" and "fraudulent," stated this week, "I will have an open mind" regarding the future of cryptocurrencies. Despite this shift in tone, he raised a critical question: "Other than as a speculative asset, what does it actually do in the real economy?"
The recent rally in bitcoin prices has been characterized by JPMorgan analysts as a "debasement trade," driven by fears of U.S. dollar devaluation and rising inflation. Musk, who has been appointed to lead the Doge department of government efficiency under the new Trump administration, has voiced concerns over excessive U.S. government spending that escalated during the COVID-19 lockdowns.
Kashkari's change in perspective coincides with Trump's administration, which is reportedly filled with pro-bitcoin and crypto advisors, including Howard Lutnick, the CEO of Cantor Fitzgerald, who is leading Trump's transition team and is a potential candidate for Treasury Secretary.
Trump's victory has sparked optimism among traders, who anticipate that his administration will ease U.S. crypto regulations and bring about a shift in leadership at regulatory agencies that have historically been critical of the crypto market. Additionally, Trump has proposed the creation of a U.S. bitcoin strategic reserve, suggesting that bitcoin could eventually surpass gold in value, and has even considered using bitcoin to address the U.S.'s staggering $35 trillion debt.