Fed Chairman Powell recently made it clear that the Fed will not include Bitcoin in its balance sheet, arguing that the Federal Reserve Act does not allow the Fed to hold Bitcoin. The market reacted strongly to this statement, and Bitcoin fell rapidly afterwards. But if you analyze it carefully, you will find that the Fed's refusal to accept Bitcoin is actually completely logical.
The fundamental contradiction between the Federal Reserve and Bitcoin:
Functions of the Federal Reserve:
The core function of the Federal Reserve is to manage and issue US dollars, regulate the money supply in the US economy, and ensure the stability of the US dollar. As the world's most widely used legal tender, the US dollar can influence the global financial system through central bank policy operations (such as interest rate hikes and quantitative easing). The Federal Reserve's goal is to ensure economic growth and control inflation by regulating money supply.
The mission of Bitcoin:
The birth of Bitcoin was precisely to resist the global fiat currency system, especially the 'unlimited issuance' behavior of the dollar. Bitcoin's design is decentralized, with a total supply cap of 21 million coins, and no central authority or government can control the issuance of Bitcoin. This makes Bitcoin a deflationary digital asset, endowing it with characteristics that stand in opposition to traditional fiat currencies.
The Federal Reserve's acceptance of Bitcoin is tantamount to self-destruction:
Getting the Federal Reserve to accept Bitcoin is as impossible as getting Powell to 'sell his own wife.' The Federal Reserve's responsibility is to maintain financial stability by controlling the money supply, while Bitcoin represents a decentralized, uncontrollable monetary system that directly challenges the Fed's monetary policy. If the Federal Reserve were to accept Bitcoin, it would essentially relinquish control over the dollar, which is clearly impossible.
Challenges of cryptocurrencies and market reactions:
Although the Federal Reserve has clearly stated that it does not accept Bitcoin, Bitcoin, as a decentralized digital currency, has still found its place globally. The volatility of the crypto market is the norm; while Powell's remarks led to sharp fluctuations in the market in the short term, this does not signify the end of the crypto market. In fact, Bitcoin and other cryptocurrencies are providing new options for the global economy, especially in times of increasing uncertainty, where more and more institutions and individuals view crypto assets as a safe-haven asset.
Possibilities for the future:
Although the Federal Reserve is unlikely to embrace Bitcoin, the core values of Bitcoin—decentralization, inflation resistance, and immunity from government intervention—remain the reasons why global investors are optimistic about it. As part of the resistance against fiat currency systems, Bitcoin will continue to attract investors' attention, and with the trend of decentralization in the global economy, more and more countries and institutions may accept and use Bitcoin.
At the same time, Trump is about to take power in the United States again, and he has explicitly stated in his campaign that he wants to make the U.S. the 'global cryptocurrency capital.' This policy could have a profound impact on the cryptocurrency market. If U.S. policy leans towards easing, it could bring new opportunities to the crypto market.