While the American federal reserve is preparing to adjust interest rates on Wednesday, a wider upheaval to the central bank could have serious implications for cryptographic markets.
The Fed should reduce interest rates tomorrow, in a decision that traditionally signals a gathering on cryptographic markets: lower yields on assets and obligations that are more risky as the crypto are more attractive.
Expected rate reductions occur in the midst of a political battle and a new appointment to the Federal Reserve. The administration of the American president Donald Trump charged the governor of the Fed, Lisa Cook, of mortgage fraud when she requests her withdrawal. Meanwhile, the Senate confirmed the economic advisor of the White House Stephen Miran to the Council of Governors.
The accusations against Cook and the effort to appoint a person with links to the administration could mean a less independent federal reserve, which plays an important role in the definition of cryptographic policy.
What a political federal reserve means for cryptographic policy
The Trump administration seeks to withdraw Cook – a person named from the Biden era – because it aims to exercise more control over the federal reserve. On August 25, the White House X page published a letter in which Trump dismissed Cook, accusing him of making false declarations on one or more mortgage agreements.
Cook denied the accusations and refused to resign. His legal team said that the accusations were motivated by politics and that the White House “rushed to invent new justifications for its surpassing”. Cook herself said it was “unprecedented and illegal”.
On Monday, the Washington Court of Appeal prevented the White House from removing Cook from its post in the Federal Reserve. This will allow him to maintain his post while the case is pending.
This morning, Miran, economist and president of the Council of Economic Advisors, who also made pro-Crypto comments in the past, was confirmed by the Senate.
His position is temporary – the term ends in January 2026 – but Miran refused to undertake to resign as adviser to the White House if his mandate extends beyond January 31.
This makes it fear that democratic legislators fear that the Fed and its monetary policy program will be more indebted for Trump’s political objectives.
In relation: Trump Renews pushes to oust the Fed cook before the drop in expected rates
Aaron Brogan, founder of the law firm focused on the Crypto Brogan Law, told Cintelegraph: “The Fed has a great authority over the banks, and, ultimately, the banks are quasi-regulators of the cryptographic industry by determining which can and cannot access the financial services.”
“It is unlikely that this influence is decreasing with a less independent Fed, but politics could. I bet it would be more modifiable and sensitive to public whims. ”
A politicized Fed is a relatively unexplored territory. When asked what a less independent Fed meant for us a monetary policy, Brogan said: “No one knows.”
“There is a hypothesis that a dependent Fed would have a more liberal and overflowing monetary policy simply because it is more sensitive to public opinion, which is unconscious. But as we have not seen, it is pure speculation. In this administration, at least, Trump would reduce rates. ”
The crypto market is preparing for a drop in federal reserve rate
While Washington legislators are fighting for the fate of the central bank, cryptographic markets are preparing for the Fed meeting tomorrow, where they are expected to lower the rates.
Kevin Rusher, founder of the real world ecosystem (RWA) borrows and lending the Raac ecosystem, told Cintelegraph that “the markets are on board”.
“The resumption of the reduction cycle begins to unlock the 7.2 dollars of dollars in the funds of the monetary market, as well as the billions linked to the mortgage debt in progress.”
He predicted that liquidity would flow into alternative investments generating yield such as those in decentralized finance (DEFI) and RWAS.
Alice Liu, a research leader in CoinmarketCap, told Cointelegraph that the “high strata of beta” like Ether (ETH) and Solana (soil) are particularly affected by the Fed interest rate changes.
“These exchanges such as growth technology-more sensitive to liquidity and the appetite for risks than BTC. Especially since interest rate reductions could potentially trigger additional capital injected into risk assets, investors could consider deploying additional capital in the narrative of ETH digital oil or the growth of soil adoption,” she said.
She said that the DEFI tokens are “relatively more attractive” when interest rates drop, increasing the tokens related to the loan / DEX activity. “Bitcoin is” always the quality crypto “and less sensitive to rates for interest rate changes, but can always move” around major political surprises and liquidity turns “.
Kobeissi’s letter wrote: “When the Fed reduces rates for less than 2% of all time, the S&P 500 generally loves it.” Although the immediate term results have been mixed, “in 20 of the last 20 times, it happened, the S&P 500 ended more 1 year later.”
They are also waiting for the same result this time. “There will be more volatility in the long term, but long -term asset owners will be part.”
“Gold and Bitcoin know it. The higher price action that we have seen in these asset classes is pricing in what is coming.
The political struggle for the Fed is always indecisive, but it does not matter which draws the levers, the low interest rates are a welcome spectacle for traders.
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