11-05-2021, 07:42 AM
Would the Fed backstop crypto?
<!-- SC_OFF --><div class="md"><p>I posted this on <a href="/r/askeconomists">r/askeconomists</a> but no one took a stab at it so I’ll post it here. It’s just a thought experiment. </p> <p>I’ve been reading about the covid 19 credit crisis and the Feds intervention, and what struck me about the SMCCF was mainly the direct targeting of ETFs by the Fed to provide price support to credit issuance even though it doesn’t realllly do that. (The PMCCF which does, was barely used). The implication here was that credit markets were being supported, which they were indirectly by providing liquidity in the credit markets, but really this action would have supported ETF price recovery much more than bond price recovery, and secondary credit markets more than primary. </p> <p>Now, JPow also alluded that other asset classes could theoretically be supported in future crises if required (not out of ordinary - BoJ has already been purchasing equity ETFs for some time now) and with central banks opening up there balance sheet like never before and much more ballsy with policies so they can get in front of a crisis - from a purely theoretical perspective, if the asset class was to become large enough do you think that the Fed would purchase cryptocurrencies in a future crisis to provide price support? Their main aim is to stabilise volatility and well there’s no more volatile asset class than this. </p> <p>This is more of a thought experiment and also about opinions on the reach of fed intervention.</p> <p>Edit: Yikes I think people have misunderstood the point of this post. It makes no opinions on crypto or the fed (they miiight be a monster from Jekyll island idk) but empirically we’ve seen the Fed will come In hot to help and this DOES stabilise markets. Whether that’s a good of bad way of doing things, that’s not the point here. What’s being asked is do you think they would stabilise the crypto market in the same way to avoid contagion or all out market meltdowns.</p> <p>No one is getting rich off a crypto backstop, the price isn’t mooning, it’s merely keeping BTC at 40k and ETH at 2.5k for example</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/Mindless-Permit-6812"> /u/Mindless-Permit-6812 </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/qmsdre/would_the_fed_backstop_crypto/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/qmsdre/would_the_fed_backstop_crypto/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>I posted this on <a href="/r/askeconomists">r/askeconomists</a> but no one took a stab at it so I’ll post it here. It’s just a thought experiment. </p> <p>I’ve been reading about the covid 19 credit crisis and the Feds intervention, and what struck me about the SMCCF was mainly the direct targeting of ETFs by the Fed to provide price support to credit issuance even though it doesn’t realllly do that. (The PMCCF which does, was barely used). The implication here was that credit markets were being supported, which they were indirectly by providing liquidity in the credit markets, but really this action would have supported ETF price recovery much more than bond price recovery, and secondary credit markets more than primary. </p> <p>Now, JPow also alluded that other asset classes could theoretically be supported in future crises if required (not out of ordinary - BoJ has already been purchasing equity ETFs for some time now) and with central banks opening up there balance sheet like never before and much more ballsy with policies so they can get in front of a crisis - from a purely theoretical perspective, if the asset class was to become large enough do you think that the Fed would purchase cryptocurrencies in a future crisis to provide price support? Their main aim is to stabilise volatility and well there’s no more volatile asset class than this. </p> <p>This is more of a thought experiment and also about opinions on the reach of fed intervention.</p> <p>Edit: Yikes I think people have misunderstood the point of this post. It makes no opinions on crypto or the fed (they miiight be a monster from Jekyll island idk) but empirically we’ve seen the Fed will come In hot to help and this DOES stabilise markets. Whether that’s a good of bad way of doing things, that’s not the point here. What’s being asked is do you think they would stabilise the crypto market in the same way to avoid contagion or all out market meltdowns.</p> <p>No one is getting rich off a crypto backstop, the price isn’t mooning, it’s merely keeping BTC at 40k and ETH at 2.5k for example</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/Mindless-Permit-6812"> /u/Mindless-Permit-6812 </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/qmsdre/would_the_fed_backstop_crypto/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/qmsdre/would_the_fed_backstop_crypto/">[comments]</a></span>Kind Regards R