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The U.S. Federal Reserve typically presents a reassuring picture of the financial sector in its public statements. However, recent comments from Fed Vice Chair for Supervision Michelle Bowman suggest something different, according to analysts: not a reflection on the current situation, but a preparation for an economic climate that will require more credit flow. And what is the impact on the bitcoin price?
Signals of a Supervisory Shift #
Although Bowman claims that U.S. banks are solid, she notably uses terms like “tailoring,” “reducing burdens,” and “avoiding unnecessary constraints.” According to regulators, such language is almost exclusively used when the central bank expects credit to become more important for the economy and current regulations are too tight.
In her statement, Bowman argues that the existing package of capital requirements leans too heavily on rules designed for the very largest banks. This unnecessarily hampers smaller and mid-sized banks, precisely at a time when the Fed believes the economy could use extra credit capacity.
More Room for Mortgages and Treasuries #
A large part of her message focuses on the mortgage market. Due to the way mortgages are treated in capital rules, banks are finding this form of credit increasingly unattractive. Bowman states that this depresses the accessibility of housing finance, and that a recalibration of the rules is needed to make banks more active again.
She also criticizes existing leverage requirements that discourage banks from holding U.S. Treasury bonds. This is remarkable, as the U.S. will need to issue large amounts of new Treasuries in the coming years. According to analysts, this sounds like a subtle call to adjust the balance sheet rules so that banks can absorb a larger portion of them.
Preparing for a Softer Economic Period #
Bowman’s tone is unusually sharp for a Fed governor. By calling rules “outdated,” “burdensome,” and “not aligned with economic reality,” she creates room for a significant easing later this year. She emphasizes that previous annual reviews produced few changes, but that this year will be different.
According to experts, this indicates that the Fed is already anticipating a period of economic slowdown, in which more flexible credit will be needed to sustain growth. Less strict rules should prevent regional banks from being stifled by the same regulations once created for global mega-banks in a weaker economic climate.
What Does This Mean for Bitcoin’s Price? #
A Fed that is looking ahead to a more flexible credit climate has two important implications for bitcoin:
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More liquidity is positive for risk assets If the Fed does indeed ease rules to keep credit flows steady, more financial room will be created in the system. Historically, risk assets, including bitcoin, have benefited from periods when liquidity is expanded or less strictly managed.
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A signal that the economy is cooling could cause volatility The fact that Bowman is delivering this message now means the Fed is seeing signs of economic weakening. In previous cycles, this led to more fluctuations in the bitcoin price: first due to uncertainty, and then often a recovery once policy easing approaches.
In short: Bowman’s message points to a Fed that wants to clear the financial “pipes” before pressure builds. This could make bitcoin volatile in the short term, but could actually support it in the medium term as the market speculates on looser financial conditions.