A Surge in Crypto Prices Reflects An “Increased Risk Appetite,” says Fed in its Monetary Policy Report


For the first time, the Federal Reserve has singled out the surge in cryptocurrency asset prices in its overall assessment of the stability of the financial system.

In the brief comment revealed in the Fed’s semi-annual Monetary Policy Report to Congress released on Friday, the central bank said the rise reflected increased risk-taking by investors.

Some parts of the financial system had grown more vulnerable to potential instability since its last account to Congress in February. However, the core of the system remained resilient, said the Fed in the Monetary Policy Report.

“The surge in the prices of a variety of crypto assets also reflects in part increased risk appetite.”

Besides crypto, the central bank also issued a warning about the general level of asset prices, which it said:

“may be vulnerable to significant declines should investor risk appetite fall, interest rates rise unexpectedly, or the recovery stall.”

The report further stated that commercial real estate prices were high and said that spreads on corporate bonds and leveraged loans remained low.

As we reported, Fed chair Jerome Powell also met with the Coinbase CEO in May and former CFTC head and crypto advocate Christopher Giancarlo a day later.

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