Let's be real, whenever the Fed steps in, the immediate reaction from many is, "Here we go again, another bailout for Wall Street." That’s an understandable fear, steeped in historic precedent. What if this time, it's different? What if the Fed's potential crypto intervention, hinted at by Boston Fed President Susan Collins, isn't just about protecting the big players, but about safeguarding the growing number of everyday folks dipping their toes into the digital currency waters?

Crypto: No Longer Just for Insiders

That narrative that crypto is only for the venture capitalists and tech bros – that’s an old narrative. The reality is far more democratic. How single mothers in Venezuela are using Bitcoin to avoid hyperinflation. At the same time, US-based young adults are contrastingly establishing their portfolios with Ethereum. Crypto is re-enfranchising people to build wealth outside historical walls.

  • Accessibility: Crypto exchanges are easier to use than ever, with fractional ownership allowing anyone to invest with even a few dollars.
  • Global Reach: Crypto transcends borders, offering financial solutions in countries with unstable currencies or limited banking infrastructure.
  • Youth Appeal: Younger generations are digital natives, more comfortable with crypto than traditional investments.

To ignore this shift is not just shortsighted, it’s dangerous. To dismiss the threat of a future crypto market crash is to ignore the millions of regular Americans who are already invested in this class of assets. It’s not even the “whales” who will be most impacted—it’s the everyday investor.

A Social Safety Net, Digitized

Think of it this way: we have regulations to protect consumers from predatory lending practices, workplace safety laws to protect workers from exploitation, and social security to provide a safety net for retirees. Why aren’t we extending the same type of protection to the quickly increasing millions of crypto investors out there. In fact, many of these investors are some of the most vulnerable.

In the latest upward market shakeout, total liquidations have exceeded an astounding $2.18 billion. This $68 billion figure is not just an abstract number. Individuals who might have put their life savings, their children’s college funds, or their retirement nest eggs.

The Fed's potential intervention, armed with “various tools” as Collins said, isn't about guaranteeing profits. It's about preventing catastrophic losses that could disproportionately impact those who can least afford it. It's about ensuring a level playing field where everyday investors aren't left at the mercy of market manipulation and unchecked volatility. That’s especially true when worries over a global trade war are still hanging in the air, creating a different kind of uncertainty.

Mitigating Moral Hazard, Responsibly

Naturally, the conservative argument of “moral hazard” is true. The concern that a Fed backstop will create a moral hazard by incentivizing risky behavior is real. This does not mean we must discard the baby with the tub water. We can and should implement safeguards to mitigate this risk:

  • Stricter Exchange Oversight: Increased regulation of crypto exchanges to prevent fraud and market manipulation.
  • Investor Education Programs: Government-funded programs to educate the public about the risks and opportunities of crypto investing.
  • Targeted Interventions: Focusing interventions on stabilizing systemic risks, rather than bailing out individual companies or investors.

The 2020 precedent demonstrates that bond buying will strengthen the economy, causing a rally in Bitcoin. All this to say, contrary to the interpolated narrative that intervention is bad for crypto, it can do good — if we play our cards right. The recent drop in the Producer Price Index (PPI) and the lower-than-expected Consumer Price Index (CPI) data indicate a complex economic landscape where targeted interventions can be beneficial.

We can’t allow the fear of moral hazard to stop us from acting. It’s important to take action to protect vulnerable investors, but one size doesn’t fit all. We should be compassionate enough to provide a safety net to those who need it, while being tough enough to encourage responsible behavior.

It's time to reframe the narrative. Clip and share: Don’t dismiss the Fed’s potential crypto lifeline as yet another bailout to benefit the rich. Rather, understand it as an essential step to creating a more equitable and inclusive financial ecosystem. A system where everyone has the opportunity to participate in the digital economy, without being left vulnerable to its inherent risks.

So, what can you do? Encourage policies that support smart, federal crypto regulations, require investor education programs, and above all, get the word out. Let’s ensure that this time around, when the Fed acts, it helps the people—not just the whales.