Sam Bankman-Fried, the CEO of FTX exchange recently blamed the US FED for the crypto market crash. The founder believes the interest rate hike by the Fed has played a major role in killing investors’ interest in the market.
Last week, the Fed increased interest rates in the United States by three-quarters of a percentage point, the highest increase in close to 30 years. While the move is meant to regulate inflation, the crypto and stock markets will be affected as the interest rates hike means a lesser flow of funds into the economy.
In the last few years, crypto proponents have strongly recommended cryptocurrency investments, tagging Bitcoin and other top assets as a hedge against inflation. This proposition has been backed by the performance of these assets in the last five to ten years.
More recently though, it seems cryptocurrencies are not living up to the expectations of many investors. Bitcoin, the most famous crypto asset is about 70% away from its ATH, and so is Ether.
The current economic condition of the United States mirrors that of the COVID era in March 2020. Sam Bankman-Fried believes the Fed’s decisions have resulted in fear on the part of investors, and the current market prices are an indirect result of the Fed’s decisions.
Another CEO Blames the Fed for Economic Instability
Interestingly, Cathie Wood shares the same sentiment with Bankman-Fried. Cathie Wood is the CEO of Ark Invest, and she has blasted the Fed for being more worried about its legacy than the economy.
The American investor believes the Fed is relying on lagging indicators like the CPI, also noting that another hike in interest rates may be proposed in the coming month. Cathie Wood also mentioned that consumer sentiment is lower today than it was in 2008-2009 and 1980-1982, during the global financial crisis.
She warned that Jerome Powell and other representatives of the Fed may be making the same mistake made by Paul Volcker, the former chair of the Fed. Just like Paul Volcker, Jerome Powell has been increasing interest rates, but using this strategy to curb inflation may be damaging to the economy in the long run.
