Recently, Federal Reserve Chairman Powell clearly stated that the Federal Reserve will not include Bitcoin in its balance sheet, citing that the Federal Reserve Act does not allow the Fed to hold Bitcoin. In response to this statement, the market reacted strongly, and Bitcoin quickly fell afterward. However, upon closer analysis, it becomes evident that the Federal Reserve's refusal to accept Bitcoin is entirely logical.
Fundamental opposition between the Federal Reserve and Bitcoin:
Functions of the Federal Reserve:
The core function of the Federal Reserve is to manage and issue the dollar, adjusting the money supply in the U.S. economy to ensure the stability of the dollar. As the most widely used fiat currency globally, the 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 adjusting the money supply.
The mission of Bitcoin:
The birth of Bitcoin is precisely to resist the global fiat currency system, especially the 'unlimited issuance' behavior of the dollar. Bitcoin is designed to be decentralized, with a maximum supply limit of 21 million coins, making it impossible for any central authority or government to control the issuance of Bitcoin. This makes Bitcoin a digital asset that resists inflation and bestows it with characteristics that oppose traditional fiat currencies.
The Federal Reserve accepting Bitcoin is equivalent to self-destruction of its functions:
Getting the Federal Reserve to accept Bitcoin is as impossible as getting Powell to 'sell his own wife.' The Federal Reserve's duty is to maintain financial stability by controlling the money supply, while Bitcoin is a decentralized and uncontrollable currency system, which directly challenges the Federal Reserve's monetary policy. If the Federal Reserve accepts Bitcoin, it would mean relinquishing control over the dollar, which is clearly impossible.
Challenges of cryptocurrencies and market reactions:
Although the Federal Reserve has clearly stated it will not accept Bitcoin, Bitcoin, as a decentralized digital currency, has still found its place globally. The volatility of the crypto market is the norm; although Powell's remarks caused the market to experience severe fluctuations 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 the context of increasing uncertainty in the global economy, where more and more institutions and individuals regard crypto assets as a safe-haven asset.
Future possibilities:
Although the Federal Reserve is unlikely to accept Bitcoin, the core values of Bitcoin—decentralization, anti-inflation, and immunity from government intervention—remain the reasons why global investors are optimistic about it. As part of the fight against fiat currency systems, Bitcoin will continue to attract investor attention, and with the trend of global economic decentralization, more and more countries and institutions may adopt and use Bitcoin.
At the same time, Trump is about to take power in the U.S. again, and he has clearly stated during his campaign that he wants to make America the 'global cryptocurrency capital.' This policy could have a profound impact on the cryptocurrency market. If U.S. policies trend toward easing, it may bring new opportunities for the crypto market.