{"id":5762,"date":"2022-01-24T02:46:16","date_gmt":"2022-01-24T02:46:16","guid":{"rendered":"http:\/\/egrowonline.com\/?p=5762"},"modified":"2022-01-24T02:46:16","modified_gmt":"2022-01-24T02:46:16","slug":"experts-react-to-the-feds-digital-currency-report-and-falling-prices-for-bitcoin-and-ethereum-heres-what-investors-should-know","status":"publish","type":"post","link":"http:\/\/egrowonline.com\/?p=5762","title":{"rendered":"Experts React to the Fed&#8217;s Digital Currency Report and Falling Prices for Bitcoin and Ethereum. Here&#8217;s What Investors Should Know"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div>\n<div class=\"disclosure   \">\n<div class=\"disclosure__container\">\n<div class=\"disclosure__content\"> <button class=\"disclosure__heading js-disclosure\">Editorial Independence<\/button><\/p>\n<div class=\"disclosure__wrapper js-expand\">\n<div class=\"disclosure__text\"><span style=\"font-weight: 400\">We want to help you make more informed decisions. Some links on this page \u2014 clearly marked \u2014 may take you to a partner website and may result in us earning a referral commission. For more information, see <a target=\"_blank\" href=\"https:\/\/time.com\/nextadvisor\/about-us\/#makemoney\" rel=\"noopener\"><b> How We Make Money.<\/b><\/a><\/span><\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<p>It\u2019s official: The Federal Reserve is toying with the idea of issuing a U.S. digital currency.<\/p>\n<p>In a long-awaited <a target=\"_blank\" href=\"https:\/\/time.com\/nextadvisor\/investing\/cryptocurrency\/latest-crypto-news\/\" rel=\"noopener\">report released last week<\/a>, the Fed explored the costs and benefits of a <a target=\"_blank\" href=\"https:\/\/www.federalreserve.gov\/publications\/files\/money-and-payments-20220120.pdf\" rel=\"noreferrer noopener\">government-issued digital currency<\/a>, but deferred a final decision on whether to move forward. Instead, the Fed is giving the public and other stakeholders until May 20 to share their input before taking further action.<\/p>\n<p>Unlike cryptocurrencies, which are typically created within the private sector and regularly see big price swings, a central bank digital currency (CBDC) would be a digital form of cash that\u2019s issued and backed by America\u2019s central bank. However, whatever move the Fed makes next could \u201cfortify cryptocurrencies or detract from their value,\u201d according to Grant Maddox, a certified financial planner and founder of Hampton Park Financial Planning based in South Carolina. \u201cIt depends on the direction our government chooses to take,\u201d he adds.<\/p>\n<p>The Fed was clear in the report that it won\u2019t proceed with the issuance of a CBDC \u201cwithout clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law.\u201d\u00a0<\/p>\n<p>The Fed is attempting to be \u201cpolitically savvy\u201d as it weighs a digital dollar, says Salman Banaei, head of public policy in North America for crypto data firm Chainalysis. If the Fed had taken a clear stance on the matter, \u201cthey would have gotten a lot of political pushback,\u201d says Banaei.\u00a0<\/p>\n<p>Hours after the report\u2019s release, and amid the <a target=\"_blank\" href=\"https:\/\/www.nytimes.com\/2022\/01\/21\/business\/economy\/stock-markets-down-inflation.html\" rel=\"noreferrer noopener\">stock market\u2019s worst week<\/a> in nearly two years, Bitcoin and Ethereum saw significant drops. The prices of <a target=\"_blank\" href=\"https:\/\/time.com\/nextadvisor\/investing\/cryptocurrency\/bitcoin-crash-continues\/\" rel=\"noopener\">Bitcoin<\/a> and <a target=\"_blank\" href=\"https:\/\/time.com\/nextadvisor\/investing\/cryptocurrency\/ethereum-hits-new-all-time-high-price\/\" rel=\"noopener\">Ethereum<\/a> haven\u2019t been this low since July.<\/p>\n<p>\u201cThere are two leading factors influencing the demand for crypto now: its value as an inflation hedge and its value as a risk asset,\u201d says Banaei. \u201cThe perceived likelihood of a <a target=\"_blank\" href=\"https:\/\/time.com\/nextadvisor\/investing\/cryptocurrency\/future-of-cryptocurrency\/\" rel=\"noopener\">crypto future<\/a> rises or falls based on regulatory risk too.\u201d<\/p>\n<p>Here\u2019s what experts are saying about the report released this week, and what investors should make of it.<\/p>\n<h2>What Experts Are Saying About the Fed Report<\/h2>\n<h3>Salman Banaei<\/h3>\n<p><strong>Point of view: <\/strong>Head of Public Policy in North America for crypto data firm Chainalysis<\/p>\n<p><strong>Reaction: <\/strong>\u201cWhat I was surprised by was how seriously the Fed took the notion of a CBDC. The crypto industry is excited to see that this is happening. A lot of the infrastructure that has been built to support the crypto industry could easily integrate the CBDC into existing providers. But the timeline for a CBDC is going to be far more extended \u2014 I think it\u2019s going to take two to four years before we get another major milestone.\u201d<\/p>\n<h3>Laura Shin<\/h3>\n<p><strong>Point of view: <\/strong>Host of the \u201cUnchained Podcast\u201d and author of \u201cThe Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze\u201d<\/p>\n<p><strong>Reaction:<\/strong> \u201cIt\u2019s not surprising that the Fed would be exploring a central bank digital currency because blockchain technology, although it\u2019s still being developed, has many advantages over our current analog systems. Plus, it could help the US dollar maintain its global reserve currency status. It already looks like China could try to leverage its digital yuan to chip away at the USD\u2019s status as the global reserve currency. It\u2019s also not surprising that the Fed is not ready to announce any decision, but are currently just soliciting feedback, because a central bank digital currency raises a lot of questions about security and privacy, plus has the potential to disrupt existing financial institutions.\u201d<\/p>\n<h3>Grant Maddox<\/h3>\n<p><strong>Point of view: <\/strong>CFP and Founder of Hampton Park Financial Planning\u00a0<\/p>\n<p><strong>Reaction: <\/strong>\u201cThey are keeping up with the likes of China and others who have advanced in <a target=\"_blank\" href=\"https:\/\/time.com\/nextadvisor\/investing\/cryptocurrency\/what-is-blockchain\/\" rel=\"noopener\">blockchain<\/a>. A digital U.S. currency may allow for quicker payments to foreign allies, improving our geopolitical outlook. The move could improve monetary policy decisions by allowing for easier distribution. We join about 90 other countries reviewing this option. The addition could add additional complexity to our world markets and distract attention from the dollar.\u201d<\/p>\n<h3>Chris Chen\u00a0<\/h3>\n<p><strong>Point of view: <\/strong>CFP and Founder of Insight Financial Strategists\u00a0<\/p>\n<p><strong>Reaction:<\/strong> \u201cBlockchain has plenty of applications that don\u2019t have to be a currency, so there are still plenty of things to do in the private sector. I firmly believe that no self-respecting government will give up control of its currencies to a private sector entity. Governments need to retain control of the money supply and of interest rates. Like it or not, these are major tools for managing economies. The U.S. is not the only country thinking of digitizing its currency. China is on its way, too, as are a number of other countries.\u201d<\/p>\n<h2>What Does the Report Mean for Crypto Investors?<\/h2>\n<p>While there probably aren\u2019t any immediate changes crypto investors should make based on the Fed report released this week, it\u2019s a good reminder that policy makers are paying attention to how perceptions of crypto are taking shape.<\/p>\n<p>\u201cThe Fed move means that people who were thinking of <a target=\"_blank\" href=\"https:\/\/time.com\/nextadvisor\/investing\/cryptocurrency\/should-you-use-crypto-like-cash\/\" rel=\"noopener\">crypto as actual currency<\/a> are going to get their bubble popped,\u201d says Chen. \u201cMany <a target=\"_blank\" href=\"https:\/\/time.com\/nextadvisor\/investing\/cryptocurrency\/bitcoin-price-predictions\/\" rel=\"noopener\">Bitcoin<\/a> types were thinking that it is a currency and that it would replace traditional currencies. Well, not if the Fed, the European Central Bank, and other central banks have anything to say about it.\u201d<\/p>\n<p>The fundamentals of cryptocurrency investing remain the same. Experts say you should stick to the big two cryptocurrencies, <a target=\"_blank\" href=\"https:\/\/time.com\/nextadvisor\/investing\/cryptocurrency\/bitcoin-price-history\/\" rel=\"noopener\">Bitcoin<\/a> and <a target=\"_blank\" href=\"https:\/\/time.com\/nextadvisor\/investing\/cryptocurrency\/ethereum-price-history\/\" rel=\"noopener\">Ethereum<\/a>, and only invest what you\u2019re OK with losing or <a target=\"_blank\" href=\"https:\/\/time.com\/nextadvisor\/investing\/cryptocurrency\/how-much-your-portfolio-should-be-crypto\/\" rel=\"noopener\">no more than 5% of your total portfolio<\/a>. Always prioritize important aspects of your finances, such as saving for emergencies, paying off high-interest debt, and saving for retirement, ahead of cryptocurrency investments. As for where you <a target=\"_blank\" href=\"https:\/\/time.com\/nextadvisor\/investing\/cryptocurrency\/how-to-buy-bitcoin\/\" rel=\"noopener\">buy and trade crypto<\/a>, stick with a mainstream, high-volume <a target=\"_blank\" href=\"https:\/\/time.com\/nextadvisor\/investing\/cryptocurrency\/what-are-cryptocurrency-exchanges\/\" rel=\"noopener\">cryptocurrency exchange<\/a>, like <a target=\"_blank\" href=\"https:\/\/time.com\/nextadvisor\/investing\/cryptocurrency\/coinbase-review\/\" rel=\"noopener\">Coinbase<\/a> or <a target=\"_blank\" href=\"https:\/\/time.com\/nextadvisor\/investing\/cryptocurrency\/gemini-review\/\" rel=\"noopener\">Gemini<\/a>, that proactively complies with evolving federal and state regulators.<\/p>\n<\/div>\n<p><br \/>\n<br \/><a href=\"https:\/\/time.com\/nextadvisor\/investing\/cryptocurrency\/expert-reaction-to-fed-digital-currency-report\/\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Editorial Independence We want to help you make more informed decisions. Some links on this page \u2014 clearly marked \u2014 may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money. It\u2019s official: The Federal Reserve is toying with the idea of [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":5763,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[41],"tags":[50,246,271,158,342,667,1321,164,102,666,4091,146],"class_list":["post-5762","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ethereum","tag-bitcoin","tag-currency","tag-digital","tag-ethereum","tag-experts","tag-falling","tag-feds","tag-heres","tag-investors","tag-prices","tag-react","tag-report"],"jetpack_publicize_connections":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"http:\/\/egrowonline.com\/wp-content\/uploads\/2022\/01\/Experts-React-to-the-Feds-Digital-Currency-Report-1000x630.jpg","_links":{"self":[{"href":"http:\/\/egrowonline.com\/index.php?rest_route=\/wp\/v2\/posts\/5762","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/egrowonline.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/egrowonline.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/egrowonline.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/egrowonline.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5762"}],"version-history":[{"count":1,"href":"http:\/\/egrowonline.com\/index.php?rest_route=\/wp\/v2\/posts\/5762\/revisions"}],"predecessor-version":[{"id":5764,"href":"http:\/\/egrowonline.com\/index.php?rest_route=\/wp\/v2\/posts\/5762\/revisions\/5764"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/egrowonline.com\/index.php?rest_route=\/wp\/v2\/media\/5763"}],"wp:attachment":[{"href":"http:\/\/egrowonline.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5762"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/egrowonline.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5762"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/egrowonline.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5762"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}