Fed shifts stance sparks $3 trillion Bitcoin and crypto price surge

Bitcoin has rallied to a record recently; this is primarily due to Donald Trump's decisive US presidential election victory, with the bitcoin price now braced for a huge "game-changer” role, according to a detailed report by Forbes.

Bitcoin races towards $100,000, crypto market rushes towards $3 trillion

The bitcoin price has closed in on $100,000 per bitcoin, rocketing higher as a "perfect storm" pushes the combined crypto market back above $3 trillion. This $3 trillion market cap was last touched by the cryptocurrency in 2021, the Forbes report detailed further.

It is important to note that, as Tesla billionaire and Trump advisor Elon Musk has came out with a serious US "bankruptcy" warning, a top Federal Reserve official has suddenly curtailed his criticism of bitcoin and crypto.

"I will have an open mind," Minneapolis Federal Reserve president Neel Kashkari told Coindesk this week.

Brief history of Bitcoin

Bitcoin is the first decentralized cryptocurrency. Nodes in the peer-to-peer Bitcoin network verify transactions through cryptography and record them in a public distributed ledger, called a blockchain, without central oversight.

Consensus between nodes is achieved using a computationally intensive process based on proof of work, called mining, that secures the bitcoin blockchain. Mining consumes large quantities of electricity and has been criticized for its environmental impact.

Bitcoin was earlier termed as worthless

Kashkari has earlier called bitcoin and cryptocurrencies more broadly "worthless," "fraudulent" and "nonsense" and in 2020 compared the crypto market to a "giant garbage dumpster."

Still, despite assuring to remain open to crypto, Kashkari asked, "other than as a speculative asset, what does it actually do in the real economy?"

The bitcoin price rally this year has been called a "debasement trade" by JPMorgan analysts who have predicted the bitcoin price could continue to rally on fears of US dollar devaluation and inflation. Due to the upcoming Trump administration there is a possibility of inflation in the US picking up again.

Musk tasked with controlling government spending

Tesla billionaire Elon Musk, appointed to lead the Doge department of government efficiency under the new Trump administration, has led a growing backlash against out-of-control US government spending that exploded through the Covid-era lockdowns.

Kashkari's weakening of his outlook towards bitcoin and crypto comes as US president-elect Trump has surrounded himself with heavily pro-bitcoin and crypto advisors, including Howard Lutnick, the chief executive of Wall Street giant Cantor Fitzgerald who is heading up Trump's transition team and is in the running to be his Treasury secretary pick, the Forbes report explained further.

Trump's victory has pumped the price of Bitcoin higher over the last few days as traders bet his administration will mean an easing of US crypto regulations and a change of leadership at regulatory agencies that have been pessimistic about crypto markets.

The optimism due to Trump’s promise of turning America into the ‘Crypto capital of the world’ is still running high and is fuelling the endless rally in Bitcoin. Trump has also shared plans to create a US bitcoin strategic reserve, predicting the bitcoin price could eventually eclipse gold and the possibility of using bitcoin to pay off the US's $35 trillion debt pile.

This looks difficult as an idea still it is crucial to see the ultimate stance of the upcoming Trump administration towards Bitcoin and the crypto world as a whole.

Global investors, market participants and crypto enthusiasts will carefully follow these developments. These developments will help them in making informed investment calls.