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US Federal Reserve Chairman, Jerome Powell recently made headlines with his optimistic outlook on the crypto market. During a Congressional hearing, Powell expressed his belief that crypto is demonstrating sustainability as an asset class within the US.
This statement came as part of Powell’s presentation of the Federal Reserve’s Semi-Annual Monetary Policy Report to the House Committee on Financial Services.
Jerome Powell Recognizes the ‘Staying Power’ of Crypto in the US
At the hearing, Rep. Warren Davidson (R-Ohio) highlighted concerns about the long-term viability of crypto in the US economy. Davidson pointed out that the crypto market cap in the US stands at approximately $1.1 trillion and asked Jerome Powell if he acknowledged the long-term viability of crypto.
In response, Powell stated that crypto does appear to have some ‘staying power’, but he also noted that its market capitalization has decreased over the past year.
Notably, the concept of ‘staying power’ as defined by Nasdaq refers to an investor’s ability to remain in the market without selling their position when the investment’s value decreases. Powell’s acknowledgment of crypto having some staying power suggests that he recognizes its ability to retain value and remain relevant in the long run.
Factors Contributing to the Decline in Market Cap
The collapse of the FTX crypto exchange in November had a significant impact on the overall market cap of crypto. Earlier reports indicated that the total market cap dropped below $1 trillion following FTX’s collapse. The incident rattled the industry and raised concerns about the stability and regulatory oversight of crypto exchanges.
Additionally, Rep. Davidson highlighted the volatility of crypto during the hearing, attributing it largely to the lack of legal clarity surrounding the industry. In recent times, the crypto industry has been faced with increased scrutiny and pressures from regulators. For instance, the SEC filed charges against Binance and its founder Changpeng ‘CZ’ Zhao, citing securities law violations.
However, Davidson has expressed hope that the committee would contribute to providing the necessary regulatory clarity for market participants, including SEC Chair Gary Gensler.
Davidson mentioned two bills that are currently under consideration, one focusing on stablecoins and the other on digital asset market structure, as potential measures to address these issues.
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