Federal Reserve Governor Chris Waller says the wave of excitement that swept through crypto markets after President Donald Trump’s election win has started to cool. Speaking at a conference on Monday, Waller explained that deeper links between crypto and traditional finance have changed market behavior and forced investors to reassess risk.
“I think some of the euphoria that came into the crypto world with the current administration is kind of fading,” Waller said. He noted that mainstream financial firms entered the market aggressively, but that shift also brought stricter risk controls and profit-taking. As a result, sell-offs followed as institutions adjusted positions. The same sentiment was expressed in the most recent crypto market outlook reports and institutional adoption updates on Wall Street’s increasing crypto presence.
TradFi integration reshapes crypto cycles
Crypto no longer trades in isolation, and Waller stated that as banks, asset managers, and funds increase their exposure, crypto assets behave like a normal risk asset. That dynamic, he said, explains recent volatility better than any single catalyst. Congress’s slow progress on a comprehensive crypto market structure bill has also weighed on sentiment, leaving firms uncertain about compliance obligations and product design.
Despite the pullback, Waller brushed off sharp price swings as part of crypto’s nature. “Prices go up, prices go down, that’s the business,” he said, adding blunt advice for investors who struggle with volatility: don’t participate if the swings feel uncomfortable.
Bitcoin’s price action illustrates that reality. Bitcoin has dropped approximately 45% from its October peak, near $125,000, and is currently trading around $69,500 after briefly dipping below $60,000. Market watchers note the recent drawdowns have tended to come after runs of strong institutional flows, which is a phenomenon that digital asset volatility research has also sought to investigate.
Fed plans limited access for crypto firms
Waller also discussed the “payment accounts” that the Federal Reserve has been working on, commonly called “skinny master accounts.” These accounts aim to give fintech and crypto firms limited access to the central banking system without the full privileges granted to traditional banks. The Federal Reserve collected industry feedback through last week, with crypto companies largely supportive and banking groups urging caution.
“If we can do this reasonably well, I’d like to have it done by the end of the year,” Waller said. The plan includes eliminating interest payments and providing limits to the balance. More on this issue can be found in Federal Reserve policy releases and broader payments innovation analysis.
Regulation and realism set the tone
Waller’s words also underscore the emerging trend of realism in crypto markets. Undoubtedly, the dearth of regulatory clarity and the increasing presence of TradFi contribute, in turn, to the decline of excessive crypto speculation. This naturally does not spell the demise of crypto assets; however, it does alter the standards by which they are viewed.
The story for investors and builders remains the same: crypto’s prospects are closely tied to mainstream finance, and with that comes regulation, discipline, and fewer parabolic price moves.
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