federal reserve

Bitcoin ‘bear market rally continues’ after BTC price jumps to $23.4K

The Fed rate hike and comments from Jerome Powell serve to buoy risk assets, with one analyst arguing that the worst of the bank’s “hawkish” phase has already passed.

Bitcoin (BTC) consolidated higher into July 28 after United States monetary policy changes fueled optimism in risk assets.

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

Fed hike instils fresh crypto optimism

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD climbing to highs of $23,452 on Bitstamp overnight.

The pair had reacted strongly to the latest Federal Reserve key rate hike, despite this conforming to market predictions. Subsequent comments from Fed Chair Jerome Powell added to the breakout’s momentum.

“I think the reason this is providing some relief to the equity market is the Fed is acknowledging that there can be an impact on growth, to the economy, based on their policy,” Gargi Chaudhuri, head of asset management giant BlackRock’s iShares investment strategy Americas, told CNBC:

“They’re recognizing there are two sides of this — there’s a growth tradeoff to fight inflation. The recognition is something we heard today that we didn’t hear before.”

Crypto commentators had already predicted that the Fed would find itself stuck between two stools in the form of forty-year-high inflation and the risk of a recession arising from fighting it.

“Who’s outperforming here? Nasdaq & Crypto,” Alf, creator of the Macro Compass Newsletter, wrote in part of a Twitter summary of the week’s events:

“If the Fed isn’t gonna force tighter financial conditions on autopilot anymore, real yields will actually start declining again.”

He noted that forthcoming rate hikes were not being priced in as beating or even equalling the 75-basis-point July move, contributing to “a higher likelihood that ‘peak Fed hawkishness’ is behind us.”

Eyes on $23,500 daily close

When it comes to BTC price action, commentators were thus cautiously optimistic while waiting for the last remnants of volatility to clear the market.

Related: Price analysis 7/27: BTC, ETH, BNB, XRP, ADA, SOL, DOGE, DOT, MATIC, AVAX

“Not jumping the gun just yet, but daily closes above 23450 and I’ll start to look for long setups towards 26500,” popular trader and analyst Crypto Tony wrote on July 28.

Bitcoin thus had to match its overnight highs and hold them to asset a change of trend.

On-chain analytics resource Material Indicators meanwhile eyed what it described as a “strong long signal” on the daily close, something which was in the process of strengthening the short-term bull case.

“Bear Market Rally continues,” it concluded in a tweet alongside a buy and sell signal chart.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

‘Bullish rate hike’ — Why crypto spiked today in the face of bad news

The Fed’s attempts to reel inflation in by increasing interest rates are usually associated with a pullback of investment activity across markets.

The cryptocurrency markets have been pumping since the announcement of a 75 basis point interest rate hike in the United States, with experts explaining that the markets may have been initially bracing for much worse.

On July 27, the price of Bitcoin (BTC) surged around 8% to the mid $22,500 mark following the Federal Open Markets Committee (FOMC) decision to raise interest rates yet again. Many other top crypto assets surged in price as well, with Ether (ETH), Polkadot (DOT) and Polygon (MATIC) all seeing notable double-digit gains over the past 24 hours.

Quantum Economics founder and CEO Mati Greenspan on Wednesday jokingly questioned whether this was a “bullish rate hike” on Twitter.

Speaking with Cointelegraph, Greenspan noted that investors were clearly expecting worse and suggested this latest bounce is nothing out of the ordinary:

“Markets love going up on Fed days, even when their decision is to be tough. Powell is particularly skilled at delivering bad news. Clearly investors were expecting worse.”

The Fed’s attempts to reel inflation in by increasing interest rates are usually associated with a pullback of investment activity across markets.

However, there are mixed opinions among the community about whether the latest pump will have enough momentum to sustain upward or if there is a significant retracement on the cards before the market starts to fully recover

Pav Hundal, an analyst at Australian crypto exchange Swyftx, told Cointelegraph that the company was “surprised at the exuberance of the reaction to yesterday’s rate hike,” as the underlying macro landscape still seems up in the air:

The Fed is saying one thing and the markets seem to be hearing something else every time we see rate rises. In June, it was the Fed suggesting large rate hikes would be ‘uncommon,’ this time around it’s Jay Powell hinting that the pace of increase might ‘slow.’”

“The best gauge of what’s to come is the underlying economic data and for now at least, it does look like some inflationary pressures are easing, with gas prices falling alongside futures prices for staples like corn and wheat, as well as some shipping costs,” he added.

Related: Ethereum price ‘cup and handle’ pattern hints at potential breakout versus Bitcoin

Hundal went on to note that Swyftx saw a 100% increase in early trading surrounding the news, indicating that “there’s clearly a lot of people who see value in the current market prices.”

The analyst emphasized that a broader bullish or bearish trend will not likely become apparent until the U.S. releases important data relating to the performance of its gross domestic product (GDP) in the coming days, which could signal whether the country is officially in recession or not:

“The good news is we’re not going to have to wait too long to see what happens to the crypto market when any initial volatility washes out. The U.S. is about to release its GDP data and that’s going to be a big stress test. Any negative sentiment here could wipe out recent gains.”

“But if the macro landscape starts to show signs of resilience, we could see the crypto market cap stabilize at the $1 trillion point and rally from there,” he added.

Bitcoin spikes above $22.2K as Fed votes for 75-basis-point rate hike

No surprises from the Fed as Bitcoin bulls see rewards for late longs with the press conference still to come.

Bitcoin (BTC) charged above $22,000 on July 27 after the United States Federal Reserve enacted another major interest rate hike.

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

Fed: “Appropriate” to keep hiking after July

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD reacting positively to confirmation that the Federal Open Markets Committee (FOMC) had unanimously voted to hike the Fed funds rate by 75 basis points.

“The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run,” a press release stated.

“In support of these goals, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 percent and anticipates that ongoing increases in the target range will be appropriate.”

Markets had already expected that 75 basis points would be the Fed’s next move. Commentators, however, increasingly considered the implications of the central bank’s balancing act between taming inflation and avoiding recession going forward.

“Watch the Fed abandon forward guidance and rate commitments and embrace data-dependency. This cycle of hikes ends at 2 pm tomorrow. Buy bonds,” David Rosenberg, founder and president of Rosenberg Research & Associates, stated the day prior.

Looking farther out, meanwhile, Wall Street macro strategist David Hunter forecast continued relief for risk assets. More pertinent was a bet that recent lows would not repeat, a potential boon for Bitcoin bulls given the cryptocurrency’s ongoing correlation to equities markets.

“No matter what the Fed decides today (75 or 100bps), the market is poised for a move higher to S&P 4150–4200 & then maybe a sharp, short pullback to 3800 before a much bigger, more sustainable rally to 6000 gets underway,” he told Twitter followers.

“The lows are in.The market not likely to undercut the June lows.”

At the time of writing, volatility characterized spot markets as BTC/USD flitted around $22,000. Fed chair Jerome Powell was due to begin a press conference at the time of writing, his language apt to add further head or tailwinds to the market trajectory.

“In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve’s Balance Sheet that were issued in May,” the press release additionally confirmed.

Traders bet on a Bitcoin boost

Analyzing the market setup, meanwhile, bullish consensus among traders was palpable.

Related: Will the Fed prevent BTC price from reaching $28K? — 5 things to know in Bitcoin this week

Analyst Dylan LeClair noted long positions building on derivatives exchange FTX in the hours prior to the decision.

As Cointelegraph reported earlier, the institutional sentiment was seen to be improving over the second half of July, according to research from analytics firm Arcane Research.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Ethereum’s bearish U-turn? ETH price momentum fades after $1.6K rejection

Ether risks falling further below $1,350 in August as the ETH price rally is losing steam.

Ethereum’s native token Ether (ETH) tumbled on July 26, reducing hopes of an extended price recovery. The ETH/USD pair dropped by roughly 5%, followed by a modest rebound to over $1,550.

Ethereum gets rejected at $1,650 

These overnight moves liquidated over $80 million worth of Ether positions in the last 24 hours, data from CoinGlass reveals.

ETH/USD hourly price chart. Source: TradingView

The seesaw action also revealed an underlying bias conflict among traders who have been stuck between two extremely opposite market fundamentals.

The first is the euphoria surrounding Ethereum’s potential transition to proof-of-stake in September, which has helped Ether’s price to recover 45% month-to-date.

However, this bullish hype is at odds with macroeconomic headwinds, namely the Federal Reserve’s and the European Central Bank’s hawkish stance, which put pressure on risk assets and saw Ether price shed 68% from its record high of $4,950 to date.

But the short term could provide some upside for ETH price. For instance, analyst PostyXBT anticipates Ether to undergo an interim upside retracement based on the token’s recent swings inside an ascending channel pattern, as shown below.

ETH/USD four-hour price chart featuring ascending channel setup. Source: TradingView

In other words, ETH’s price could hit $1,700 ahead of July’s close if the pattern plays out.

Bearish divergence

Nonetheless, watching the same recovery trend in conjunction with Ether’s four-hour relative strength index (RSI), a momentum oscillator indicator, shows extreme disparities.

Interestingly, Ether’s price has been forming higher highs since July 18, while its RSI has been making lower highs simultaneously.

That shows a bearish divergence between ETH’s price and momentum, meaning bulls have been losing their grip on the market, and a downtrend may follow.

ETH/USD four-hour price chart featuring bearish divergence. Source: TradingView

Ether also risks breaking below its ascending channel’s lower trendline, which coincides with two more price supports: the 50-4H exponential moving average (50-4H EMA; the red wave) at around $1,500 and the 0.5 Fib line near $1,475.  

Related: Will Ethereum Merge hopium continue, or is it a bull trap?

Losing these key supports would likely push below $1,350 (the $0.382 Fib line and the blue 200-4H EMA wave) in August, down 10%–15% from Ju’s price, should this bearish scenario play out.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Will the Fed prevent BTC price from reaching $28K? — 5 things to know in Bitcoin this week

Bitcoin prepares for what promises to be a tense week of rate hikes, earnings and more as BTC fails to reclaim crucial trendline.

Bitcoin (BTC) enters a new week with a question mark over the fate of the market ahead of another key United States monetary policy decision.

After sealing a successful weekly close — its highest since mid-June — BTC/USD is much more cautious as the Federal Reserve prepares to hike benchmark interest rates to fight inflation.

While many hoped that the pair could exit its recent trading range and continue higher, the weight of the Fed is clearly visible as the week gets underway, adding pressure to an already fragile risk asset scene.

That fragility is also showing in Bitcoin’s network fundamentals as miner strain becomes real and the true cost of mining through the bear market shows.

At the same time, there are encouraging signs from some on-chain metrics, with long-term investors still refusing to give in.

Cointelegraph takes a look at the week’s possible market movers in a tense week for crypto, equities and more.

Fed to decide on next rate hike in “another fun” week

The story of the week, all things being equal, is no doubt the Federal Reserve rate hike.

A familiar tale, the Federal Open Markets Committee (FOMC) on July 26-27 will see policymakers decide on the extent of the next interest rate move. This is tipped to be either 75 or 100 basis points.

U.S. inflation, as in many jurisdictions, is at forty-year highs, and its advance appears to have caught the establishment by surprise as calls for a peak are met with even larger gains.

“Should be another fun one,” Blockware lead insights analyst William Clemente summarized on July 25.

The interest rate decision is due July 27 at 2:00 pm EST, a diary date that could well be accompanied by increased volatility across risk assets.

This has the potential to be exacerbated, one analyst warned, thanks to low summer liquidity and a lack of conviction among buyers.

“Entering ECB/FOMC/Tech Earnings amid the lowest liquidity of the year. Market is back to overbought. Bulls, let it ride,” Twitter account Mac10 wrote.

A previous post also flagged Q2 earnings reports as potentially contributing to a downwards move in line with previous behavior.

“BTC and risk assets have pumped higher on FOMC events this year, only to sell off after, is this time different?” fellow analysis account Tedtalksmacro continued:

“June’s FOMC meeting saw the US federal reserve deliver a 75bps hike – the single largest since 1994. More hefty hikes are expected before inflation is ‘normalised.’”

The week is already feeling different to last, even before events begin unfolding — Asian markets are flat in comparison to last week’s bullish tone, one which accompanied a resurgence across Bitcoin and altcoins.

While one argument says that the Fed cannot raise rates much more without tanking the economy, meanwhile, Tedtalksmacro pointed to the employment market as a target for keeping hikes coming.

“Bitcoin will struggle to move past 28k until data deteriorates,” he added.

Spot price fails to nail key moving average

Bitcoin’s latest weekly close was something of a halfway house for bulls, data from Cointelegraph Markets Pro and TradingView shows.

While managing its best performance in over a month, BTC/USD missed out on reclaiming the essential 200-week moving average (MA) at $22,800.

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

After the close, which came in at around $22,500, Bitcoin began falling to the bottom of its latest trading range, still lingering below $22,000 at the time of writing.

“Observing IF we find support at $21,666 horizontal. Patience,” popular trader Anbessa told Twitter followers in his latest update.

Fellow account Crypto Chase, meanwhile, suggested that a return to the 200-week MA would result in the further modest upside.

“Chopping around the Daily S/R (red box) with an inability to flip 22.8K (Daily resistance) to support. Multiple attempts to do so, but failing so far,” he wrote alongside explanatory charts:

“If price pushes above again and finds acceptance, I’ll watch 22.8K to become support for potential long entry to 23.2K.”

A later update eyed $21,200 as a potential bearish target, this also forming a support/resistance level on the daily chart.

At $21,900, however, Bitcoin still remains around $1,200 higher versus the same point a week ago.

BTC/USD 1-week candle chart (Bitstamp) with 200-week MA. Source: TradingView

Elsewhere, the latest price action was not enough to change long-term views. For Venturefounder, a contributor at on-chain analytics firm CryptoQuant, a macro bottom had yet to appear, this potentially coming in as low as $14,000.

“Inline with the past halving cycles, this is still my most viable forecast for Bitcoin before next halving: BTC will capitulate in the next 6 months & hit cycle bottom (anywhere between $14-21k), then chop around in $28-40k in most of 2023 and be at ~$40k again by next halving,” a retweeted forecast originally from June reiterated.

Difficulty returns to March levels

In a sign that miners’ troubles due to price weakness may only just be beginning, upheaval is now visible across the Bitcoin network.

Difficulty, the measure of competition among miners which adjusts itself relative to participation, has been declining since late June and is now back at levels not seen since March.

The most recent adjustment was particularly noticeable, knocking 5% off the difficulty total and heralding change in miner activity. That was the largest single drop since May 2021, and the next, due in ten days’ time, is currently estimated to take difficulty down another 2%.

As arguably the most important aspect of the Bitcoin network itself, difficulty adjustments also set the scene for recovery by leveling the playing field for miners. The lower the difficulty, the “easier” — or less energy-intensive — it is to mine BTC due to there being less competition overall.

In the meantime, however, the need to stay afloat remains a preoccupation, data shows. According to CryptoQuant, miners sent 909 BTC to exchanges on July 24 alone, the most in a day since June 22 and a 5% difficulty decrease.

A turnaround for miners thus remains out of sight this week.

Bitcoin network fundamentals overview (screenshot). Source: BTC.com

As Cointelegraph additionally reported, it is not just the BTC price that is giving miners a hard time under current conditions.

Congratulations to the MVRV-Z score

One of the hottest on-chain metrics in Bitcoin has just crossed what is arguably its most important level — zero.

On July 25, Bitcoin’s MVRV-Z Score returned to negative territory after a brief week above, in so doing falling into the zone typically reserved for macro price bottoms.

MVRV-Z shows how overbought or oversold BTC is relative to “fair value” and is popular thanks to its uncanny ability to define price floors.

Its return could signal a fresh period of price pressure, as accuracy in catching bottoms has a two-week margin of error.

At the beginning of July, Cointelegraph reported on MVRV-Z, giving a worst-case scenario of $15,600 for BTC/USD this time around.

Sentiment cools from four-month highs

For the crypto market, the past week may well have been a brief period of irrational exuberance if sentiment data is to be believed.

Related: Top 5 cryptocurrencies to watch this week: BTC, ETH, BCH, AXS, EOS

The latest numbers from the Crypto Fear & Greed Index show a steady decline from what has been the most positive market sentiment since April.

As of July 25, the Index stands at 30/100 — still described as “fear” driving the mood overall but still five points above the “extreme fear” bracket in which the market previously spent a record 73 days.

Sentiment has nonetheless made quite the comeback since mid-June when Fear & Greed hit some of its lowest levels on record at just 6/100.

Crypto Fear & Greed Index (screenshot). Source: Alternative.me

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

56% of banks say DLT and crypto are ‘not a priority’ in near future — Fed survey

Many respondents from major banks said the technology would likely be unimportant for liquidity management practices until 2027.

A survey conducted by the Federal Reserve Board of the United States suggested that the majority of officials at major banks did not consider crypto-related products and services a priority in the near future.

According to the results of a Fed survey released on Friday, more than 56% of senior financial officers from 80 banks said distributed ledger technology and crypto products and services were “not a priority” or were “a low priority” for their growth and development strategy for the next two years, while roughly 27% said they were a medium or high priority. However, roughly 40% of respondents in the survey said the technology was a medium or high priority for their banks for the next two to five years.

Results of Fed survey from May 2022. Source: Federal Reserve

Answers from surveyed bank officials were similar to the effects of crypto on liquidity management practices, with many respondents saying the technology would likely be unimportant for both the next two years and two-to-five years down the road. Some of the officials said the banks were “actively monitoring the situation and will adapt to the landscape as needed.”

The senior financial officers surveyed represented banks  held roughly 75% of total banking system reserve balances as of May 2022. Domestic banks comprised 46 of those surveyed, and foreign banking organizations totaled 34.

Related: How does the Fed impact crypto?

As the central bank of the United States, the Federal Reserve will likely be the institution to release a digital dollar if approved by lawmakers or regulators. The Securities and Exchange Commission and the Commodity Futures Trading Commission also oversee many of the regulations covering digital assets and financial institutions in the country.

On Wednesday, the Senate confirmed former Ripple adviser Michael Barr as the Fed’s next vice chair for supervision, ensuring that a full seven members will sit on the board of governors in 2022.

Two Bitcoin price prediction polls, same outcome: $10K BTC is coming

While a classic technical indicator could be hinting at BTC price falling below $13,000 as well.

Bitcoin (BTC) investors in China plan to buy the dip despite an ongoing market correction and a nationwide crypto ban, a new survey shows.

Consensus sees Bitcoin at $10K

A survey of 2,200 people conducted on China-based social media platform Weibo found that 8% would buy Bitcoin when its price hits $18,000, according to Wu Blockchain. While 26% of the respondents prefer to wait until BTC reaches $15,000.

But a majority anticipated the price to fall even further with 40%, saying they would buy BTC at $10,000.

Chinese investors more cautious on Bitcoin than U.S.

Interestingly, another survey conducted by Bloomberg MLIV Pulse earlier in July yielded a similar outcome, with 60% of the net 950 respondents on Wall Street calling for a $10,000 Bitcoin price.

The two polls show a striking similarity in the bearish sentiments of crypto speculators in the United States and China. Nonetheless, on-chain activity shows that investors in the U.S. have been more bullish on Bitcoin versus their Asian counterparts since June 2022.

Related: Bitcoin fights key trendline near $20K as US dollar index hits new 20-year high

In particular, Bitcoin’s month-to-month price change, which tracks the 30-day change in the regional BTC price, has been positive only during U.S. sessions. Conversely, the metric has only been negative during Asian trading hours, data from Glassnode shows.

Bitcoin month-over-month price change. Source: Glassnode

Technical indicator hints at BTC price below $13K

Simultaneously, weakening technicals are also starting to support further downside, particularly on the larger three-day timeframe.

BTC/USD three-day price chart featuring “bear flag'”setup. Source: TradingView

Bitcoin has been forming a potential “bear flag” pattern that could result in a drop below $13,000 by September, as illustrated above.

As Cointelegraph reported, persistent macroeconomic headwinds for BTC/USD continue to fuel bearish arguments against increasing evidence of a possible price bottom. 

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

US Senate confirms Michael Barr as Fed vice chair for supervision

Michael Barr was on the advisory board of Ripple Labs from 2015 to 2017 and has called on lawmakers to create a regulatory framework on stablecoins to prevent the risk of runs.

The United States Senate has confirmed the nomination of law professor Michael Barr to become the next vice chair for supervision for the Federal Reserve.

In a 66-28 vote on the Senate floor on Wednesday, U.S. lawmakers confirmed Barr as vice chair for supervision of the Federal Reserve System for four years, filling the last seat on the seven-member board of governors. Barr, who was on the advisory board of Ripple Labs from 2015 to 2017, also served as the Treasury Department’s assistant secretary for financial institutions under former President Barack Obama and taught courses on financial regulation at the University of Michigan.

As vice chair for supervision, Barr will be responsible for developing policy recommendations for the Fed as well as overseeing the supervision and regulation of certain financial institutions, second only to Chair Jerome Powell. According to the White House, he was “a key architect” of the 2010 Dodd-Frank Act — legislation that continues to influence financial policy in the United States, and set up the position of vice chair for supervision.

During his confirmation hearing before the Senate Banking Committee in May, Barr said innovative technologies including cryptocurrencies had “some potential for upside in terms of economic benefit” but also “some significant risks.” He called on lawmakers to create a regulatory framework on stablecoins to prevent the risk of runs.

In a statement on his intention to nominate Barr in April, President Joe Biden said he wanted to push the candidate through quickly, likely because the position had been vacant since Fed governor Randal Quarles’ term ended in October 2021. The Senate confirmed Lael Brainard for a four-year term as Fed vice chair in April and Powell as Fed chair in May. Barr is the last major candidate put forth by Biden for the Fed to be confirmed.

“Barr has strong support from across the political spectrum — and has been confirmed by the Senate on a bipartisan basis,” said Biden in April. “He understands that this job is not a partisan one, but one that plays a critical role in regulating our nation’s financial institutions to ensure Americans are treated fairly and to protect the stability of our economy.”

Biden’s first nominee for the Fed vice chair of supervision, Sarah Bloom Raskin, withdrew her name from consideration in March citing “relentless attacks by special interests” and referred to Republican lawmakers who “held hostage” her nomination since February. Wednesday’s Senate vote suggested that more than 15 Republicans joined Democrats in confirming Barr.

Related: How does the Fed impact crypto?

The Fed, in addition to the Securities and Exchange Commission and the Commodity Futures Trading Commission, oversees many of the regulations covering digital assets and financial institutions in the United States. Upon Barr taking his position, a full seven members will sit on the Fed’s board of governors — an event which has not happened in roughly ten years.

Fed vice chair Brainard urges faster crypto regulation, touts role for stablecoin

Brainard says if crypto remains unregulated as it is integrated into the larger financial system, it will bring risks of instability of the type currently being seen.

Regulate now or regret it later, United States Federal Reserve Board vice chairperson Lael Brainard told an audience at a Bank of England conference in London on Friday. Crypto has the same basic risks as tradition finance and needs “strong guardrails,” Brainard claimed, pointing to the recent downturn in market as proof. 

Brainard spoke the most general terms throughout her speech. She highlighted recent performance issues in cryptocurrency, such as volatility, correlation with risky equities, liability to bank runs and other risks associated with traditional finance, and over-collateralization as a stress amplifier. As crypto becomes more integrated into the more extensive financial system, the need for regulation in response to those risks will become more urgent, she said.

Brainard endorsed “the principle of same risk, same disclosure, same regulatory outcome.” She also urged international cooperation among financial regulators to deal with the cross-border scope of the crypto industry. The latter appeal echoes the conclusions of a U.S. Treasury Department report released a day earlier.

Two specific areas aroused particular concern in the Fed official. The first was bank involvement with crypto increases the risk of the stability of the core financial system. Brainard said that bank involvement should be encouraged because it “provides an interface where regulators have strong sightlines.” In spite of her endorsement of the “same risk, same disclosure” principle, she seemed to argue for different treatment for crypto here, stressing that a “strong regulatory framework for crypto finance” was necessary to advance heavy bank involvement.

Related: Brainard tells House committee about potential role of CBDC, future of stablecoins

Stablecoins are a second area of risk spillover, Brainard said. Calling them a bridge between crypto and fiat, she noted that the top two stablecoins account for 80% of the market capitalization. Fiat-backed stablecoins are “highly vulnerable to runs,” she said.

Brainard saw an important role for a central bank digital currency (CBDC), saying:

“A digital native form of safe central bank money could enhance stability by providing the neutral trusted settlement layer in the future crypto financial system.”

She gave interoperability between stablecoins as a potential use for that neutral settlement layer. Finally, Brainard pointed out that, while crypto offers cheaper services among its advantages, the costs that regulation entails are worth it.

Credit unions warn about the cost of developing a CBDC

A lobby group suggests supporting the credit union engagement instead, applicating consumer protection rights to digital assets holders.

A United States-based lobbying group has raised a voice against developing a central bank digital currency (CBDC) in the United States. The National Association of Federally-Insured Credit Unions (NAFCU) believes the project’s cost outweighs the “hypothesized benefits.”

In a public letter to the U.S. Commerce Department, dated Tuesday, Andrew Morris, the senior counsel for research and policy at NAFCU, claimed that the costs would outweigh the benefits and that there are superior alternatives for accomplishing the same objectives. The letter came in response to the Department’s request for comment (RFC) on digital assets.

While the full text of the letter is currently unavailable, according to the NAFCU release, it drew attention to private and public sector payments initiatives to illustrate the availability of less disruptive alternatives for achieving payments improvement and highlighted the role credit unions already play in terms of reaching underserved populations.

It is hardly surprising that the main alternative to CBDC in the lobby group’s view is to support credit union engagement.

The letter also offers several suggestions that should help the Commerce Department to raise the global competitiveness of the U.S, such as “support for responsible innovation” within the credit union industry and the application of consumer protection laws to entities facilitating consumer engagement with digital assets.

Related: CBDC may threaten stablecoins, not Bitcoin: Ark36 exec

NAFCU sent the very same response to the Federal Reserve in May, stating that the administration of a CBDC “will distract from the Federal Reserve’s dual mandate of achieving both stable prices and maximum sustainable employment.”

A majority of experts who’ve participated in the United States Federal Reserve conference on the “International Roles of the U.S. dollar” believe a U.S. dollar CBDC would not drastically change the global currency ecosystem.