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What is the Federal Reserve and How it Impacts the Crypto Market

What is the Federal Reserve and How it Impacts the Crypto Market

As markets around the world continue to stagnate and plummet, there are many people curious as to just how low the dip can go. Bitcoin and other popular cryptocurrencies have now dropped below 60% of their all-time highs which has left many crypto traders worried about the future of their tech. However, when you evaluate the situation a little deeper, it’s easy to see that these prices are artificially being driven south as part of the Federal Reserve’s inflation policies.

Federal Reserve

The Federal Reserve plays a vital role in determining certain aspects of the economy. The somewhat shadowy group was established during a late-night voting session on December 23, 1913. President Woodrow Wilson signed into law the Federal Reserve Act following the session which created a group to centralize the US’s monetary policies. Notably, many of the lawmakers were not present for the vote that put this group in charge of the US economy.


The purpose of the Federal Reserve was to create some form of centralized control over the monetary system to help prevent many of the risks facing the dollar at the time. The vote placed the group directly in charge of vital aspects of the economy, such as approving printing and setting interest rates. The vote specifically gave 12 Federal Reserve banks the ability to print money as well.

The Federal Reserve is Not a Government Organization

One of the most interesting aspects of the Federal Reserve is that it is not a part of the Federal government. The Federal Reserve operates a separate agency. According to its creation, the FED is accountable to congress and the public. The group is unique in many ways.

For example, the FED doesn’t receive government funding to operate per se. Instead, they charge interest on money issuances and securities to cover operating costs. Any additional profit is then sent to the US treasury. If this structure seems a bit weird to you, you’re not the only one who thinks so.

Since the earliest days of the FEDs’ inception, people have questioned this structure. The fact that the group is not under government control is troubling and has led to many people considering these people as powerful global conductors who quietly orchestrate the economies of countries from the shadows. Regardless of your perspective, its hard to ignore their influence on the economy.


The main reason why lawmakers were so eager to hand control of the money system to a centralized party was that the economy had experienced several inflationary concerns prior. These issues were getting more intense with a major panic taking place in 1907. In this scenario, inflation began to spiral and banks started to run out of cash which led to a run on the banks.

A run on the banks is a term that refers to when all the bank’s depositors withdraw their funding at the same time. Banks never hold all of their client’s funds at once, as they lend them out to secure additional profits. Banks would run out of money during bank runs, which would lead to social unrest. Many people lost their life savings and being left in squalor.

Causes of Inflation

There are a lot of reasons why the banking system continues to experience inflation even with the FED operating. These issues remain primary concerns for today’s citizens, as inflation is still a hot topic in the economy. Here are some key factors that make inflation still a genuine risk for everyone.

Money Printing

Money printing continues to be a hotly debated topic in the economy. Basic economic principles dictate that if you have more supply of an item than the demand will decrease. In turn, the value of the asset will drop. This is the case for all assets, especially currencies.

Over-printing occurs for many reasons. In some instances, the government must print more money to fund wars or other expensive ventures globally. There are also incidents where the government prints money to provide citizens with economic stimulus packages.

Over Printing

The latest round of inflation was brought on by a combination of factors with over-printing being one of the main culprits. Notably, our government chose to print over 33% of the total USD in circulation in the last 8 months. This influx of currency was designed to help people survive the economically disastrous pandemic quarantines.

While the funds were helpful to people in the short term, they did no favors in the long term. The over-printing led to a rise in the cost of basic goods and services including food and other essentials. Not coincidentally, these prices rose around 30%. This percentage correlates directly to the percentage of fiat currency injected into the economy via the stimulus packages.

Supply Chain Issues

Another major problem that can lead to rising prices across the board is supply chain problems. Today’s logistics sector is a massive trillion-dollar industry that spans the entire globe. Every day supplies travel thousands of miles to reach their final destination in front of consumers.

However, issues such as war, weather, or disease can limit the capabilities of these firms to get your product to you. When this occurs, it lowers the supply which results in higher demand. The prices of everyday items can skyrocket when the supply chain is destroyed.


The COVID-19 pandemic highlights how global supply chain disruptions can lead to higher prices for nearly everything. The main reason for the prolonged inflation is that supply chains are monstrous systems that can’t be simply stopped and restarted without massive effort. As such, it can take years to return a supply chain to its peak performance.

Rising Energy Prices

Another major factor that can lead to you paying more for your stuff is increased energy prices. The cost of fuel and electricity plays a vital role in determining the final cost of a product. Since most products are not local but instead sent from the other side of the planet, rising transportation costs can have an astounding effect on prices.

Currently, there is a gas shortage driven by economic sanctions and war. Governments have attempted to buffer these prices in several ways. For example, in the US, they released access to strategic gas reserves usually meant for wartime operations. While this did help to curb rising prices, it looks like the fixes were only temporary as OPEC and Russia have now announced a drastic reduction in oil production.


The country’s announcement comes after NATO attempted to place another round of sanctions including a price cap on Russian. The sanctions were put in place to penalize the country for its invasion and annexation of parts of Ukraine.

The plan was to set a pricing table that would apply to Russian oil exports. The group would ensure no countries paid more than their set in prices. However, with OPEC’s latest decision, it appears that it has backfired. A reduction in production will result in higher prices.

How Interest Rates Fight Inflation

The FED’s primary job is to help combat inflation. It does this by raising interest rates. The higher interest rates help to cool down consumer spending in multiple ways. The first way interest rates helps to reduce demand is by making it more expensive to borrow money. Even funds borrowed on a credit card increase when interest rates go up.


A recession is a prolonged time of economic decline. Most analysts consider it a recession when the GDP of a country decreases for two straight quarters. However, there is no preset definition and no preset equation to follow in this process. In many instances, the FED can raise rates too fast and cause a recession.

This vagueness was intentional, as many factors determine if the economy is in a recession in addition to inflation. Analysts may look towards employment or housing prices as another indicator. Currently, there is a lot of debate about if the market is in recession or not.

Inflation is at 40-year highs and it cost more for regular goods and services. Additionally, there has been negative GDP in the US for two straight quarters. However, employment and housing prices continue to rise which has led many to hold off on the final declaration of recession.

Ways to Protect Your Funds During Recession

The recession arrival date may be debatable but most analysts agree that it will get here soon enough. The current state of the economy is very fragile with interest rates contining to rise. The economy is in the midst of what many analysts call the perfect storm.

The combination of war, pandemic, over-printing, and supply chain issues has created a volatile economy. The FED continues to raise interest rates to try and combat these rising prices but all of these options seem to leave the average person stuck taking losses. Some people have avoided these losses by using digital assets.

Safehaven Assets

One of the best ways to protect your wealth from bad monetary policy is to not keep your savings in fiat currency. Cryptocurrencies decouple money and government. There are some huge advantages to this structural change. For one, no politician can choose to print trillions and destroy your savings value.

Notably, cryptocurrencies like Bitcoin were developed exactly to eliminate these risks. Digital assets enable you to fight inflation. Projects like the META 1 Coin continue to change how savers operate. These next-gen protocols provide stability, store of value characteristics, and convenience.

A safehaven token is an advanced stablecoin that integrates additional protections. These protections help prevent volatility or centralization. They can also serve other roles like ensuring the token doesn’t lose its pegged value.

META 1 Coin

The META 1 Coin combines over a decade of stablecoin developments with advanced smart contracts to create a powerful tool for those seeking to avoid inflation. The token begins with a multi-asset backing. META 1 derives value from a basket of gold-related assets. This structure makes it ideal compared to fiat-backed stablecoins that suffer from the same inflation as their underlying assets.

Gold has long been considered a smart store of value. The META 1 Coin takes the best aspects of gold and combines them with the most advanced blockchain protocols. The result is an easy-to-use token that enjoys self-appreciation. Notably, the META 1 Coin shined bright during the latest market correction. The token secured 1.35% in value while other projects took massive losses over the last two months.

Never Worry About Whale Dumps Again

META 1 Coin differs from other stablecoins in several ways. For one, the protocol’s safehaven systems prevent issues such as whale manipulation. Whales are massive traders that can control the progress of a project simply by holding enough tokens to influence the ecosystem.

Many DeFi protocols today operate using a community governance system. These systems enable users to vote on and put forth proposals for the project. Whales will buy up enough tokens to take control of this process which leaves regular token holders at their mercy.

Bye-Bye Whales

META 1 prevents this concern by eliminating whales from the ecosystem. The METANOMICs DeFi protocol requires all users to prove they are individuals and not corporations, trading firms, or governments. This process helps to prevent those most likely to operate in a predatory manner from ever joining the community.

Token Limits are a Good Thing

In addition to the banning of whales, the developers have taken the step of imposing a $5 million token limit on users. The token limit prevents users from holding enough assets to be able to influence the value of the project.

This safety protection is a first in the market. It came about after it was revealed that a whale that  held over 5% of the total LUNA tokens in circulation dumped their bags and caused the project to lose 94% in days. META 1 Coin holders are safe from these risks.

Beat the FED at their Game

While the FED continues to combat inflation with the only tools it has at its disposal, it’s sure to lead to a recession. Already the prices of goods are through the roof with the average person feeling the crunch at the grocery store and the gas pumps. Thankfully, projects like META 1 offer relief and a way to prosper during time of economic uncertainty.

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