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Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, questioned the practical benefits of cryptocurrencies and stablecoins in cross-border transactions during a panel discussion.

Kashkari described the statements made by crypto advocates on the subject as “empty rhetoric,” arguing that they have no real use case.

During the panel, Kashkari illustrated the fundamental questions he posed to representatives of the cryptocurrency sector with examples. Acknowledging that traditional bank transfers are expensive and slow, Kashkari countered those who claim stablecoins solve this problem with the following scenario: “Imagine someone living in the US sending money to a relative in the Philippines for grocery shopping. Traditional methods are costly and slow. But with a stablecoin, it arrives in Manila instantly, they say.”However, Kashkari continued, stating that this explanation was insufficient: “Well, you still have to convert it to local currency. Then they say that the marketeer also uses stablecoins. This is essentially saying that the whole world should use the same currency or that all this friction should disappear, which is not going to happen.”Kashkari argued that he asked the most fundamental question for crypto and stablecoins: “Give me a use case that actually works for consumers, besides drugs and illegal things.” He described the answers he received as “word salad,” saying, “There’s nothing there, just nonsense.”
Kashkari’s views reflect the Fed’s skeptical stance on digital assets. Having previously made similar criticisms, Kashkari has described cryptocurrencies as “completely useless” and a “tool for speculation.”#fed #PredictionMarketsCFTCBacking #TrendingTopic #controversial #USJobsData $USDC
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US GDP just fell to 1.4% while inflation is rising again.

US GDP was expected to come in at 3% but it came in at just 1.4%.

That is a major downside surprise and shows that economic growth has slowed much more than markets were expecting.

One key reason behind this slowdown was the government shutdown in Q4 which lasted for nearly 1.5 months. That directly impacted output, spending, and overall activity, which pulled GDP lower.

But that is only one side of the story. At the same time, inflation data showed an increase.

PCE inflation came in at 2.9%, the highest level since March 2024.
Core PCE rose to 3%, the highest level since April 2024.

This is important because PCE is the Federal Reserve’s preferred measure of inflation. Even though CPI and core #cpi have been trending down recently, the PCE numbers show that the cost of goods and services is still rising inside the economy.

So now we have a difficult situation. On one side, growth is slowing. GDP is much weaker than expected. Economic activity is losing momentum, and job losses are increasing.

On the other side, inflation in goods and services is not fully under control. Prices are still rising at a pace that is above the Fed’s target.

This creates pressure on consumers.

If growth slows while prices continue rising, households face more difficulty managing expenses. Income growth does not keep up with the cost of living, and financial stress increases.

Now the Federal Reserve faces a clear dilemma.

If the Fed cuts rates quickly and injects liquidity into the system, it could help support GDP growth and improve the job market. Lower rates make borrowing cheaper and can boost spending and investment.

However, if inflation is still elevated, cutting rates too early could push prices higher again. That would make the inflation problem worse.

If the #Fed keeps rates high and stays on pause, inflation may cool further. But slower growth could turn into deeper weakness. GDP could weaken more, and the labor market could deteriorate further.

So right now, the Fed is stuck between two risks:

Cut rates and risk higher inflation.
Hold rates and risk deeper economic slowdown.

And that combination makes the next policy decision much more complicated than before.

January Meeting Minutes Reveal Persistent Inflation Concerns

The Federal Reserve's latest policy meeting minutes have injected fresh uncertainty into cryptocurrency markets, challenging the prevailing narrative that interest rate cuts were imminent. While the central bank maintained its benchmark rate at the 3.5% to 3.75% range during January's Federal Open Market Committee meeting, the accompanying documentation revealed a more hawkish undercurrent than market participants had anticipated.

Several committee members expressed willingness to support additional rate hikes should inflation prove stubborn, a stance that diverges sharply from the market's recent pricing of multiple rate cuts throughout 2024. This hawkish tilt represents a significant recalibration of expectations that had built steadily since late last year.

Bitcoin's Rate Sensitivity Comes Into Focus

The implications for Bitcoin are substantial. The leading cryptocurrency has demonstrated increasing correlation with traditional liquidity conditions, thriving in environments where borrowing costs are low and capital is abundant. Low interest rates typically encourage risk-taking behavior, with investors more willing to allocate funds toward volatile assets like cryptocurrencies.

However, the prospect of sustained or increased rates challenges this dynamic. Higher borrowing costs tend to divert capital away from speculative investments toward yield-bearing instruments, potentially reducing crypto market inflows. Bitcoin's price action in recent sessions reflects this sensitivity, with the asset struggling to maintain momentum following the Fed's disclosure.

Market Participants Rethink Timeline Projections

Trading desks had largely priced in an aggressive easing cycle beginning as early as March. The meeting minutes have forced a reassessment, with probabilities for March rate cuts diminishing notably. Though a March move now appears unlikely, even a small probability of tightening carries outsized significance for a market that had become complacent about the trajectory of monetary policy.

The disconnect between market pricing and Fed communication highlights the challenges facing traders attempting to navigate the current economic landscape. Forward guidance has proven less reliable as the central bank emphasizes data dependence over predetermined paths.

Critical Inflation Data Takes Center Stage

All attention now turns to forthcoming inflation readings, particularly February's Consumer Price Index report. These numbers will likely determine whether the Fed's hawkish lean translates into actual policy action. Higher-than-expected inflation would strengthen the case for additional tightening, while softer readings could validate the market's original dovish expectations.

The relationship between inflation data and Fed policy has become the primary driver of crypto market direction, superseding industry-specific catalysts. Bitcoin's fate appears increasingly tethered to macroeconomic indicators and central bank responses.

Structural Linkage Between Crypto and Monetary Policy

The evolving situation underscores a fundamental reality: cryptocurrency markets no longer operate in isolation from traditional financial systems. The connection between Bitcoin and Federal Reserve policy has strengthened considerably as institutional participation has grown and correlations with risk assets have solidified.

This structural linkage means crypto investors must now monitor central bank communications with the same diligence as traditional market participants. The era of Bitcoin as a completely uncorrelated asset has given way to a new paradigm where monetary policy expectations directly influence digital asset valuations. Until inflation demonstrates sustained moderation, Bitcoin's price trajectory will likely remain hostage to the Fed's next move.
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