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- > Bitcoin Back Above $70k USD Amid Geopolitical Conflict
- > Deadlock between US banks and crypto, as Trump weighs in
- > Kraken receives Federal Reserve Master Account
Bitcoin Back Above $70k USD Amid Geopolitical Conflict
After four months of consecutive losses for Bitcoin, the crypto market has shown signs of positive movement in the last week. Leading the way was BTC, briefly returning above $73k USD, while several major altcoins like Ethereum and Dogecoin saw strong days of buying at times over the last seven days.
At the same time, these periods of relief for the market have often been matched by sharp selloffs in the days following. To put it bluntly, volatility reigns supreme.
The crypto industry’s volatile price action, though not out of character for the market, has typified the current geopolitical situation. Last weekend we saw tensions escalate between the US, Israel and Iran leading to uncertainty across the globe – both emotionally and financially.
Oil was perhaps the biggest mover in the commodities market, spiking 20% over the past seven days at the time of writing.
Interestingly, gold – despite a sharp initial uptick following the Middle Eastern conflict developing – is trading down on the week. Often viewed as a safe haven among geopolitical uncertainty, investors have demonstrated less interest in risk-off assets even as tensions rise.
There are a couple of potential reasons for this – a rising USD (up 2% this week on the Dollar Index) and a projected rate cut in the US have potentially made risk-on assets more attractive.
This was reflected in the performance of Bitcoin, which gained approximately 5% in the past seven days of trading.
In general, the total crypto market has responded with strength to the geopolitical uncertainty, perhaps galvanising investors after a multi-month slide. It shows that, while BTC and co are still extremely volatile and susceptible to headlines, they can demonstrate periods of resilience among difficult macro conditions.
Deadlock between US banks and crypto, as Trump weighs in
The United States, among several other nations, have made a point to introduce crypto-native legislation as a means to bring regulatory clarity to the industry. The GENIUS Act was one of the highest profile examples of this, creating a framework for US-based stablecoins to follow.
Perhaps the next most well-known piece of legislation, the Clarity Act, is currently making its way through the US Government – but has encountered resistance in its present form.
The biggest roadblock is a disagreement over stablecoin yield. In simple terms, banks are arguing that these assets should not generate revenue for holders, while cryptocurrency issuers and representatives believe it is vital to the way pegged assets function.
Largely, banks are concerned about a ‘deposit flight’. If stablecoins are normalised and consumers protected, offering greater returns than banks, that US citizens may move up to $6 trillion USD in assets away from these institutions. This could fundamentally impact the way credit, debt and lending works in the United States – for better or worse, depending who you believe.
Jaret Seiberg, Managing Director at TD Cowen Washington, believes that the crypto side of the ledger will eventually win out – however, suggests the deadlock may continue well into the year.
‘To us, the banks will eventually lose on this issue politically as they are arguing against consumers getting paid money. Yet this fight could extend long enough to put CLARITY at risk.’
The current US President Donald Trump took to social media to air his opinion on the matter, siding with the crypto representatives pushing for stablecoin yields.
Kraken receives Federal Reserve Master Account
Kraken Financial, the Wyoming-based banking arm of prominent crypto exchange, Kraken, became the first digital asset company to be granted access to a Federal Reserve master account.
Essentially, this account allows the company to use Fedwire, a major liquidity and settlement system operating in the United States. Processing trillions of US dollars daily, the platform facilitates rapid inter-institutional lending, borrowing, and transfers, making it vital to the nation’s economy.
The potential implications of this access could be big for the crypto industry. Simply, it allows of relying on third-party banks, the trading platform can now settle fiat directly through the Federal Reserve.
It opens a gateway for on/off-ramping fiat for their platform that hasn’t been leveraged by a crypto exchange before, potentially improving liquidity and transaction times while allowing Kraken to hold their reserves in the Federal Reserve itself.
In broader terms, it is another step toward integration between the crypto and traditional financial industries that hasn’t been trialled previously. Whether this is a one-off or a sign of things to come, it’s hard to argue that economic policymakers aren’t taking digital assets seriously.
Ben Knight
