Photo by As the initial enthusiasm around last year’s election begins to fade, a senior Federal Reserve official stated on Monday that the recent steep drop in digital currency values is a normal market adjustment rather than a systemic failure.
Christopher Waller, a Federal Reserve governor, delivered the statements during a symposium in La Jolla, California. He reminded delegates that the current market woes, while unsettling for investors, are a normal slowdown in a sector notorious for violent price fluctuations.
Institutional investors driving selloff
Bitcoin prices have fallen dramatically from a high of $125,000 in late 2025 to a current range between $60,000 and $70,000. According to Waller, much of this decline comes from the same big financial companies that helped push prices higher in the first place.
“I think there was a lot of selloff just because firms that got into it from the mainstream finance had to adjust their risk positions,” Waller said during his speech.
The situation presents an unusual problem for the digital currency sector. For years, supporters wanted major banks and investment firms to get involved. Now that they have, these traditional players are bringing their standard risk controls with them.
When regular markets get shaky or new regulations appear on the horizon, these big institutions often sell their riskier holdings first to protect their overall investment portfolios.
The market now faces what some observers call a growing contradiction. While the basic technology behind digital currencies works better than it did during the 2022 crash, the closer ties to regular financial markets mean crypto no longer stands apart as many believed it would. Instead, it now moves up and down with broader economic trends.
Last week’s jump in price volatility reached levels not seen since the FTX exchange collapsed. This surge shows that having institutional money involved has not created the stability that many expected. Instead, it seems to spread fear faster when things don’t go as planned politically or in terms of new rules.
Waller also pointed to problems in Washington as another factor hurting the market. Even though the Trump administration has spoken in favor of the digital currency business, an important piece of legislation called the CLARITY Act has run into trouble in Congress. This bill would help define how these products should be regulated.
“Clarity seems to be sort of stalled in the Congress… Everything thought Clarity would come in and that would clear the road… It doesn’t look like it’s going anywhere anytime soon.” He said.
Waller argued that the failure to pass this law has “put people off” and created confusion about how these financial products will be managed going forward.
“Prices go up, prices go down, it’s just the nature of the business,” Waller said. “If you don’t like it, don’t get in it.”
Fed moves ahead with payment accounts
While private markets deal with falling prices, the Federal Reserve continues working on its own digital payment system. Waller said the central bank plans to introduce what officials call “payment accounts” by the end of 2026. Some people refer to these as “skinny master accounts.”
These new accounts would let technology and crypto companies connect directly to the central banking system, but with major restrictions. Unlike regular master accounts, these special accounts would not pay interest and would not allow companies to borrow money through overdrafts.
Waller mentioned that the Fed has gotten a “ton of stuff” in terms of comments from interested parties. Crypto companies generally support the idea, while traditional banks worry about facing new competition.
The payment accounts appear to be the Fed’s way of using blockchain-style technology while keeping tight control. By offering limited access, the central bank can provide round-the-clock settlement and faster transactions that digital currencies offer, but inside a regulated framework that prevents problems from spreading to the wider economy.
