Cryptos bounce as Powell calls them speculative, but not a risk to financial stability

Bitcoin rose above $49,000 after the Fed decided to speed up stimulus withdrawal

Bitcoin is trading higher Thursday morning following a jump on Wednesday afternoon after the conclusion of the Fed's final policy meeting of the year and Chairman Jerome Powell's press conference.

Bitcoin received a boost, rising above $49,000 after the Fed decided to speed up stimulus withdrawal.

Bitcoin wasn't alone as prices for other cryptocurrencies also rose. Ether went above the $4,000 level.

The meeting was able to ease investor uncertainty. Policymakers signaled they are ready to raise the short-term interest rate at least three times next year to battle inflation.

While markets, in general, were waiting and watching for the Fed's decision, cryptocurrencies were also watching closely due to the impact monetary policy has on risky assets.

The risk attached to cryptocurrencies is not lost on the Fed chairman.

"I don't see them as a financial stability concern at the moment," said Powell. "I do think they are risky. They're not backed by anything." 


"And I think there's big consumer issues for consumers who may or may not understand what they're getting," added Powell. 

The chairman touched on the issue of stablecoins.

Powell backed the conclusions of a report from the President’s Working Group on Financial Markets released on Nov. 1.

The report is considered the first step toward establishing federal-level regulatory oversight of the stablecoin sector in the U.S.

"Stablecoins can certainly be a useful, efficient consumer-serving part of the financial system if they’re properly regulated," said Powell. "Right now, they aren’t. They have the potential to scale, particularly if they were to be associated with one of the very large tech networks that exist."


Stablecoins are cryptocurrencies typically tethered 1:1 to the value of other assets like the U.S. dollar, and issuers maintain the fixed value of these currencies by backing them with reserves that match the value of the coins in circulation.