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Discussion Paper
Is There a Bitcoin–Macro Disconnect?

Cryptocurrencies’ market capitalization has grown rapidly in recent years. This blog post analyzes the role of macro factors as possible drivers of cryptocurrency prices. We take a high-frequency perspective, and we focus on Bitcoin since its market capitalization dwarfs that of all other cryptocurrencies combined. The key finding is that, unlike other asset classes, Bitcoin has not responded significantly to U.S. macro and monetary policy news. This disconnect is puzzling, as unexpected changes in discount rates should, in principle, affect the price of Bitcoin.
Liberty Street Economics , Paper 20230208

Bullard Speaks with Yahoo Finance about Inflation, Labor Markets

St. Louis Fed President James Bullard discussed his expectations for inflation 2021 and 2022. He also discussed the labor market, wages, cryptocurrencies and other topics during an appearance on Yahoo Finance.

What Is a Crypto Conglomerate Like FTX? Economics and Regulations

We explain the economics behind the rise and fall of FTX. We view FTX and its associates as components making up one large entity: a crypto conglomerate. Understanding the economics of crypto conglomerates is crucial for designing effective regulations.
Richmond Fed Economic Brief , Volume 23 , Issue 09

The Song Remains the Same

Remarks at the New York Fed and Columbia SIPA Monetary Policy Implementation Workshop, New York City.

Discussion Paper
Token- or Account-Based? A Digital Currency Can Be Both

Digital currencies, including potential central bank digital currencies (CBDC), have generated a lot of interest over the past decade, since the emergence of Bitcoin. The interest has only grown in recent months because of a desire for contactless payment methods, stemming from the coronavirus pandemic. In this post, we discuss a common distinction made between “token-based” and “account-based” digital currencies. We show that this distinction is problematic because Bitcoin and many other digital currencies satisfy both definitions.
Liberty Street Economics , Paper 20200812

Importance of Studying Innovations in Payment Technologies

For several years, economists at the St. Louis Fed have been studying innovations in payment technologies such as cryptocurrencies and blockchain, James Bullard writes.
On the Economy

Discussion Paper
Runs on Stablecoins

Stablecoins are digital assets whose value is pegged to that of fiat currencies, usually the U.S. dollar, with a typical exchange rate of one dollar per unit. Their market capitalization has grown exponentially over the last couple of years, from $5 billion in 2019 to around $180 billion in 2022. Notwithstanding their name, however, stablecoins can be very unstable: between May 1 and May 16, 2022, there was a run on stablecoins, with their circulation decreasing by 15.58 billion and their market capitalization dropping by $25.63 billion (see charts below.) In this post, we describe the ...
Liberty Street Economics , Paper 20230712

Journal Article
Fed Eyes Central Bank Digital Currency

Digital assets have been all the rage. Millions of Americans have invested in privately issued cryptocurrencies, whose market value surpassed $3 trillion for a while late last year. Further pushing the envelope of innovation and speculation, the prices of so-called "algorithmic" cryptocurrencies such as TerraUSD have been supported by yet other cryptocurrencies in arrangements that some observers have likened to Ponzi schemes. Meanwhile, collectors have spent billions of dollars to purchase pieces of art and other items in the form of digital "non-fungible tokens" or NFTs.
Econ Focus , Issue 2Q , Pages 10-13

Working Paper
Should Central Banks Issue Digital Currency?

We study how the introduction of a central bank-issued digital currency affects interest rates, the level of economic activity, and welfare in an environment where both central bank money and private bank deposits are used in exchange. Banks in our model are financially constrained, and the liquidity premium on bank deposits affects the level of aggregate investment. We study the optimal design of a digital currency in this setting, including whether it should pay interest and how widely it should circulate. We highlight an important policy tradeoff: while a digital currency tends to promote ...
Working Papers , Paper 19-26

Journal Article
When Banking Was 'Free'

From 1837 until the Civil War, currency issuance and banking were left to the states. Can this era offer lessons for today's cryptocurrency boom?
Econ Focus , Issue 1Q , Pages 28-30



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