Federal Reserve in crisis: Bitcoin to the rescue?

Fed Bitcoin 1

IMPORTANT POINTS:

  •  The US Federal Reserve reveals losses of 100 billion in 2023, with the possibility of worsening.
  • Historically profitable, the Fed faces challenges from rising interest rates and previous easing measures.
  • In the face of rising debt and inflation, Bitcoin is emerging as a potential haven for worried investors.

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On September 14, the US Federal Reserve revealed alarming accumulated losses of 100 billion in 2023. According to Reuters sources, the situation is expected to worsen. However, for risk assets like Bitcoin (BTC), this setback could be an unexpected blessing.

In the red: The Fed

The main reason for this financial setback is that interest payments on the Federal Reserve’s debt have exceeded profits on its assets and services to the financial sector. As a result of this, investors are seeking to understand the impact on interest rates and demand for scarce and verifiable assets like BTC.

Some experts believe that the Federal Reserve’s losses, which began a year ago, could double by 2024. However, the bank considers these negative results as “deferred assets,” maintaining that there is no urgent need to cover these deficits.

The Federal Reserve and its historical profitability

Historically, the Federal Reserve has been a profitable entity. The lack of profits does not affect its ability to conduct monetary policy and achieve its objectives. The losses on the balance sheet are not surprising, given the substantial increases in interest rates since March 2022, which went from almost zero to the current 5.25%.