What is the Federal Reserve and what does it do?

The Federal Reserve is the central bank of the United States, established in 1913. It controls monetary policy by setting interest rates, managing money supply, and regulating banks. The Fed influences inflation and employment levels through decisions like raising or lowering the federal funds rate—the interest rate banks charge each other. These actions affect cryptocurrency markets significantly: lower rates typically boost risk assets like crypto, while higher rates reduce them. The Fed also manages financial stability and acts as a lender during crises. Understanding Fed policy is crucial for crypto investors, as traditional finance decisions directly impact digital asset prices and trading conditions.