First Mover: Federal Reserve Does What It Wants to Do as Bitcoin Hits $11K

There's never really any right or wrong answer for how to go about it; there's only the decisions the top Fed officials end up making.

Bitcoin gained 2.2%.That's partly because Chair Jerome Powell had used a speech last month to telegraph his plans for a newly hatched technique known as "Average inflation targeting." Essentially, the Fed is now promising to keep U.S. interest rates close to zero until inflation climbs above a 2% target and stays there "For some time." On Wednesday, the only real news was the officials formalized the practice.

Just like the $1.2 trillion of Fed emergency-lending programs rolled out during the 2008 financial crisis, average inflation targeting is a brand-new tool that investors until recent times weren't aware that the central bank might ever choose to use.

In late 2019, Fed officials were predicting the economy would grow at an anemic but steady 2% clip in 2020.

Fed officials really have no idea how the economy will fare through 2023, let alone what the next few months might bring.

Markets have been stable recently, if even a little frothy, and there's no reason for the Fed to mount any particularly heroic effort right now to change that dynamic.

A plausible scenario is the Fed does as little as possible for the next several months unless markets take a fresh downturn, in which case it's possible the Fed would intervene.

The lesson for bitcoin traders or gold traders or bond traders or any other investors trying to gauge the potential for rapid inflation or currency debasement, is that if Fed officials decide to print more money, they can and they will.

The correction in the bitcoin price might be a result of growing doubts over the Fed's ability to hit the 2% inflation target.

While the prospect of high inflation is generally considered to be good for bitcoin, some market observers have expressed concern over whether the Fed has what it takes to meet its target.