- Powell considers Bitcoin a speculative investment rather than a competitor to the US dollar.
- The Federal Reserve monitors digital assets but does not oversee their regulation.
- While inflation remains a topic of concern, Powell remains optimistic about the strength of the US economy.
Cryptocurrency enthusiasts often suggest Bitcoin could replace the U.S. dollar, but Federal Reserve Chair Jerome Powell holds a different perspective.
Speaking at the New York Times DealBook Summit on Wednesday, Powell addressed Bitcoin’s role in the global economy.
In a conversation with financial journalist Andrew Ross Sorkin, Powell clarified the Federal Reserve’s stance, describing Bitcoin not as a rival to the U.S. dollar but as an investment asset akin to gold.
Powell’s comments clarified the Federal Reserve’s view of digital currencies. He emphasized Bitcoin’s extreme volatility, noting that it functions neither as a medium of exchange nor as a reliable store of value.
Turning to the broader economic outlook, Powell expressed optimism about the current state of the U.S. economy. He highlighted strong growth rates and a robust labor market as indicators of its solid performance.
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Is Bitcoin Merely a Speculative Asset, Not a True Currency?
Addressing criticisms suggesting Bitcoin could replace the U.S. dollar, Powell firmly refuted the idea, describing it as more of a speculative investment than a functional currency.
“It’s akin to gold, but in a digital, virtual form,” Powell explained. By saying so, he highlights its appeal primarily to investors rather than consumers.
He emphasized that Bitcoin’s extreme price volatility prevents it from being a reliable medium of exchange or store of value. This comparison to gold reflects their shared perception as assets often viewed as hedges against inflation.
Unlike gold, which has maintained relatively stable value over time, Bitcoin’s extreme volatility undermines its ability to serve as a reliable store of value. Powell noted that Bitcoin poses no threat to the U.S. dollar but sees it as a competitor to gold within the digital realm.
How Is the Federal Reserve Shaping Its Stance on Digital Assets?
Powell discussed the Federal Reserve’s stance on the expanding digital asset market, stressing that the central bank does not regulate cryptocurrencies directly.
He noted that the Fed’s primary role is to observe how these assets interact with the broader banking system to maintain financial stability.
While the Fed refrains from intervening, it keeps a close watch on the evolving digital asset landscape. The central bank recognizes that many cryptocurrencies influence global financial markets.
Powell’s comments come amidst ongoing debates among regulators and policymakers about how best to oversee this growing sector.
When asked if he owns any cryptocurrency, Powell explained that he is prohibited from holding such assets under Federal Reserve rules.
Is Bitcoin Redefining its Role in the Global Market?
Bitcoin has reached a market capitalization of $1.95 Trillion, outperforming many other asset classes. However, it still falls significantly short of gold, which boasts a market cap nearing $18 trillion.
Following Donald Trump’s election victory, Bitcoin experienced a sharp rally, briefly hitting a record high of $98,000 before stabilizing. Recently, the cryptocurrency crossed the $100,000 mark, a milestone it had struggled to achieve.
As of now, Bitcoin is trading near $97,869.66, attempting another leg up. Since the election, it has been reflecting a strong upward trend.
This latest surge coincided with Trump’s announcement nominating Paul Atkins as the next Chairman of the Securities and Exchange Commission (SEC).
Disclaimer
In this article, the views, and opinions stated by the author, or any people named are for informational purposes only, and they don’t establish the investment, financial, or any other advice. Trading or investing in cryptocurrency assets comes with a risk of financial loss.
