Bitcoin investors are bullish on the US Fed’s $100B loss

The U.S. Federal Reserve made a significant announcement on Sept. 14, revealing accumulated losses of $100 billion in 2023. What’s more, this situation is expected to worsen for the Fed, according to Reuters. But for risk assets like Bitcoin (BTC), this may actually be a blessing in disguise. 

The Fed in the red

The primary reason behind this financial setback is that the interest payments on the Fed’s debt have surpassed the earnings generated from its holdings and the services it provides to the financial sector.

As a result of this development, investors are now scrambling to grasp how this will impact interest rates and the demand for provably scarce assets like BTC.

Some analysts are of the opinion that the Fed’s losses, which commenced a year ago, could potentially double by 2024. The central bank categorizes these negative results as “deferred assets,” arguing that there’s no immediate necessity to cover them.

The Fed used to generate revenue for U.S. Treasury

Historically, the Federal Reserve has been a profitable institution. However, the absence of profits does not hinder the central bank’s ability to conduct monetary policy and achieve its objectives. 

Related: How do the Fed’s interest rates impact the crypto market?

The fact that the Fed’s balance sheet has incurred losses isn’t surprising, especially given the substantial interest rate hikes, which escalated from near-zero in March 2022 to the current level of 5.25%. Even if interest rates remain unchanged, Reuters suggested that the Fed’s losses are likely to persist for some time. This can be attributed to the expansionary measures implemented in 2020 and 2021 when the central bank aggressively acquired bonds to stave off a recession.

Even if interest rates remain unchanged, Reuters suggested that the Fed’s losses are likely to persist for some time. This can be attributed to the expansionary measures implemented in 2020 and 2021 when the central bank aggressively acquired bonds to stave off a recession.

In essence, the Fed functions like a conventional bank, as it must provide yields to its depositors, which primarily consist of banks, money managers and financial institutions.

An article in Barron’s effectively illustrates the impact of the $100 billion loss, stating,

“The Fed banks’ losses don’t increase federal budget deficits. But the now-vanished big profits that they used…