Federal Reserve chairman Jerome Powell has been asked about Dogecoin at a news conference.
Yahoo Finance reporter Brian Cheung said many retail investors were paying close attention to GameStop’s surge and the dramatic rise in Dogecoin. Powell responded by saying:
“Some of the asset prices are high. You are seeing things in the capital markets that are a bit frothy. That’s a fact.”
The Fed has embarked on substantially high levels of quantitative easing in response to the coronavirus pandemic — pumping additional dollars into the economy.
For some cryptocurrencies (especially Bitcoin, which has a fixed supply of 21 million,) this has been interpreted as a positive thing — because these digital assets help serve as a hedge against inflation.
The same probably can’t be said for DOGE, which has an eye-wateringly high supply of 130 billion tokens.
In this altcoin’s case, it’s more probable that the joke cryptocurrency has been driven higher by the likes of Elon Musk, the billionaire CEO of Tesla who has been tweeting about DOGE on a regular basis. Meanwhile, GameStop’s surge was likely attributable to r/WallStreetBets, the Reddit group that took on hedge funds who were shorting the stock.
What Fed’s Stance Means for Crypto
There had been nerves that the Federal Reserve may seek to “taper” down the stimulus it is currently providing against a backdrop of promising U.S. economic data.
However, these fears eventually proved to be unfounded. The Fed is going to continue buying government-backed debt at a rate of $120bn a month for now after concluding there isn’t enough evidence of “substantial further progress” towards a full recovery.
This is likely driven by concerns that the vaccine rollout is slowing in America, coronavirus infections in some areas remain high, and the emergence of new COVID variants have a chance of making jabs less effective.