Trump's close economic advisor Kevin Hassett may take charge of the Federal Reserve, and a carnival of monetary policy and the crypto market is about to begin.
As an analyst who has been working in the crypto world for many years, I have always warned everyone to be cautious of the risks that come with a shift in Federal Reserve policy. But today's situation is different; if Hassett really becomes the chairman of the Federal Reserve, we may soon witness the most accommodative monetary policy era in history, which would undoubtedly be a major boon for the crypto market.
Just last week, prediction market data showed that the probability of Hassett being nominated has surged to around 55%, placing him ahead of other candidates.
01 The Game in Washington, the Politicization of the Federal Reserve
Trump recently stated that he would soon announce the new chair of the Federal Reserve, someone who is "aligned with low interest rates." This is not just a simple personnel appointment, but a decision that could have far-reaching implications for the global financial system.
The independence of the Federal Reserve is facing unprecedented challenges. Trump has repeatedly criticized current chairman Powell for being "too slow" in action and even suggested earlier to lower the policy interest rate to 1%.
Such levels of interest rates typically only occur during economic recessions, completely contradicting the traditional wisdom of central banks.
Ironically, Hassett seems to be trying to distance himself from Trump recently, stating that "the president's opinions have 'no influence' on the decisions of the Federal Open Market Committee regarding interest rates." However, the market generally views this as just a political performance.
02 Hassett vs Wolfe: A Battle that Influences Market Trends
The current race for the chair of the Federal Reserve has narrowed down to two main candidates: Kevin Hassett and Kevin Wolfe.
Hassett, the current Director of the White House National Economic Council, is a long-time economic advisor to Trump and holds at least $1 million in Coinbase stock. He advocates for aggressive interest rate cuts and has stated that if he were to become the chair of the Federal Reserve, he would "immediately cut rates," even leaning towards a larger cut of 50 basis points.
Wolfe, a former Federal Reserve governor, has a more traditional financial background and advocates for the independence of the Federal Reserve. Although he also supports interest rate cuts, he emphasizes the need to combine it with balance sheet reforms.
Why am I more optimistic about Hassett? Because he has a relatively open attitude toward emerging asset classes like cryptocurrencies. This is rare among central bank officials with traditional financial backgrounds.
During Trump's second term, cryptocurrencies could become a core component of U.S. government economic policy. Hassett's appointment would signal a financial environment with prolonged low interest rates and increased liquidity.
03 New Opportunities for Crypto Investors
A potential policy shift at the Federal Reserve could present rare opportunities for crypto investors. Looser monetary policy typically leads to more funds flowing into high-risk assets, including cryptocurrencies.
History has shown that when the traditional financial system faces uncertainty, investors turn to alternative assets. Bitcoin's initial growth came after the 2008 financial crisis when "many people lost trust in banks and government."
Currently, 17% of U.S. adults report that they have invested, traded, or used cryptocurrencies. This percentage is as high as 41% among young people under 30.
If Hassett takes office, we may see:
A faster pace of interest rate cuts could boost liquidity in the crypto market
A more crypto-friendly regulatory environment
Institutional investors are accelerating their entry into the crypto market
04 From Monetary Policy to Hash Rate: Investors Need to Shift Their Thinking
In the face of potential policy changes, crypto investors need to shift their analytical framework. Instead of overly focusing on the political games of the Federal Reserve, it's better to delve into the fundamentals of cryptocurrencies.
The Bitcoin hash rate is a key indicator of the Bitcoin network's processing capacity. The current hash rate of the Bitcoin network far exceeds 400 EH/s. The higher the hash rate, the stronger and safer the network.
Ethereum staking is another indicator worth paying attention to. Validators can earn about 2% to 20% annual yield by staking ETH. As the network develops, this yield could become even more substantial.
When the pillars of the fiat currency world start to shake, the transparency and predictability guaranteed by code become particularly valuable. The value proposition of cryptocurrencies has never been stronger.
In the coming weeks, we will see who Trump ultimately nominates for this important position. But regardless of the outcome, the trend is clear: the intersection of monetary policy and cryptocurrencies is expanding.
The Federal Reserve may be entering a new era, and the crypto market is preparing for a potential wave of liquidity.
When the beams of the traditional financial world start to shake, the foundations built by code appear even more solid.
What do you think about the news of Hassett potentially leading the Federal Reserve? Feel free to share your thoughts in the comments!
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