He Who Should Not Have an Impact on Crypto

Crypto aspires to function without monetary oversight, but this year the U.S. Federal Reserve’s chair proved how far from reality this goal is at a time of high interest rates. That’s why, once again, Jerome Powell is one of CoinDesk’s Most Influential 2022.

AccessTimeIconDec 5, 2022 at 12:45 p.m. UTC
Updated Sep 28, 2023 at 2:27 p.m. UTC

In a perfect world, crypto wouldn’t be influenced by fiat-based monetary policy, and Jerome Powell, chair of the U.S. Federal Reserve, wouldn’t be one of the most influential people in the industry. But as proven by the latest crypto meltdown, Powell has driven the market narrative more often than not in 2022.

Four-decade-high inflation has been the focus of economic policy leaders around the globe this year. That has been particularly true of Powell and his colleagues at the Fed’s Federal Open Market Committee (FOMC), the body that has raised interest rates at a rapid pace since March, from near-zero levels to the current 3.5% to 4%.

The economic uncertainty is one of many reasons crypto assets have suffered heavy losses this year. Bitcoin (BTC), the largest crypto by market capitalization, is down 65% year to date. On average, bitcoin moved 4% on days where the Fed raised interest rates.

The total value of crypto assets is 62% lower than at the beginning of the year, when the asset class was valued at $2.2 trillion.

“Jerome Powell belongs on any list of cryptocurrency influencers given his position as chairman of the Federal Reserve,” said Howard Greenberg, educator at Prosper Trading Academy. “All financial markets, including cryptocurrencies, are impacted by the Fed's rate hikes.”

The fact that cryptocurrencies are thus affected causes chagrin for the crypto industry’s biggest advocates. Bitcoin, because of its capped total, is supposed to be immune to inflation and any Federal Reserve action.

For the first half of this year, before the crypto industry took a big hit from the failure of a number of crypto companies, including lender Celsius Network, Three Arrows Capital and most recently, FTX, bitcoin was directly correlated with both the S&P 500 and the Nasdaq 100 stock indexes, which are both strongly affected by inflation. According to traders, this was because institutional investors were increasingly buying bitcoin and trading it as they would stocks.

Bitcoin was directly correlated with both the S&P 500 and the Nasdaq 100 stock indexes

Though the correlation has since weakened, macroeconomic uncertainty is likely persist into next year. Fed officials have signaled further rate hikes are coming in 2023. Dashing the hopes of bitcoin maximalists and crypto believers, Powell’s impact on crypto assets will continue.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Helene Braun

Helene is a New York-based reporter covering Wall Street, the rise of the spot bitcoin ETFs and crypto exchanges. She is also the co-host of CoinDesk's Markets Daily show. Helene is a graduate of New York University's business and economic reporting program and has appeared on CBS News, YahooFinance and Nasdaq TradeTalks. She holds BTC and ETH.