US Companies Required to Record Crypto at Fair Value
US companies holding cryptocurrency will now be required to record their tokens at fair value, according to new accounting rules issued by the US Financial Accounting Standards Board (FASB). This change has caused crypto prices to rise.
Previous Treatment of Crypto Assets
Previously, US companies had to treat their crypto assets as indefinite-lived intangible assets. This meant that they could only record value gains if they sold the asset, but still had to record price drops even if the assets were not sold.
Criticism of Previous Accounting Standards
Executives at major crypto-owning companies like Microstrategy criticized these accounting standards for not allowing companies to fully reflect their financial positions when they held substantial capital gains on their crypto holdings. Some argued that this unfavorable treatment hindered crypto adoption by major companies and institutions.
New Crypto Accounting Rules
The new rules issued by FASB align with what the crypto industry has been demanding. Companies like Microstrategy, Tesla, and Block will now be able to capture the highs and lows of their crypto holdings. As a result, crypto prices have been rising since the news of the rule change.
Crypto Price Reaction
Bitcoin (BTC) has seen a 1% increase since the FASB news, trading near $41,900. It has found strong support above its 21-Day Moving Average, indicating bullish momentum despite a recent pullback.
Ether (ETH) rallied back above $2,200 after finding support at key long-term levels. The market remains in favor of the bulls.
All Eyes on the Fed
FASB’s new rules are positive for the crypto market as they increase the willingness for US companies to hold crypto assets. However, traders will soon turn their attention to the Fed’s latest policy announcement.
The Fed is expected to leave interest rates unchanged and release updated economic projections. Traders will analyze these projections to assess whether the Fed will start cutting interest rates in early 2024.
The market may continue betting on a dovish Fed pivot if the economic projections show a more pessimistic view for 2024 and interest rate projections indicate more anticipated rate cuts.
Hot Take: Crypto Benefits from Fed Policy Expectations
Expectations surrounding Fed policy are likely to remain a long-term tailwind for the crypto market. As the Fed’s interest rate hiking cycle comes to an end, crypto historically performs well during times of easing financial conditions in the USA.
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