Fed Chair Powell Calls Bitcoin ‘Digital Gold,’ Distances from US Dollar Rivalry
Federal Reserve Chair Jerome Powell, speaking at the New York Times DealBook Summit, redefined Bitcoin's role in the financial landscape. He characterized it not as a competitor to the US dollar but as a digital counterpart to gold, prompting discussions in financial circles.
“People use Bitcoin as a speculative asset, right? It’s like gold—only it’s virtual, it’s digital,” Powell stated.
Powell noted that Bitcoin's volatility and limited acceptance for payments or savings disqualify it as a direct competitor to the dollar, stating, “People are not using it as a form of payment or a store of value.” He described Bitcoin as "highly volatile," reinforcing the idea that its speculative nature aligns more with gold than the stability associated with the US dollar.
Federal Reserve’s Role in the Crypto Era
Powell elaborated on the Federal Reserve's stance towards digital assets, emphasizing its observational role. “Our job is to see how these assets interact with the banking system,” he remarked, clarifying that the Fed does not directly regulate cryptocurrencies.
When asked about his personal investments in crypto, Powell confirmed he does not own digital assets due to his position, indicating a commitment to neutrality in the evolving crypto market.
Despite focusing on cryptocurrencies, Powell also addressed the broader economy, describing it as being in "great shape right now" while acknowledging challenges related to growth and inflation. He pointed out that growth has exceeded expectations and inflation remains slightly above anticipated levels, raising concerns about future monetary policy.
Interest Rates and Economic Strategy
Powell advised caution regarding monetary policy. With a strong labor market and diminished economic risks, he suggested that the Federal Reserve may proceed slowly with interest rate cuts, balancing economic momentum with inflation control.
The CME FedWatch Tool indicates a 75% probability of a 25 basis point rate cut at the upcoming December 18 meeting, which would adjust the benchmark rate to a range of 4.25%-4.5%. This follows recent rate cuts totaling 75 basis points in September and November, reflecting the Fed's response to changing economic conditions.
Powell's remarks precede the Federal Open Market Committee’s crucial December meeting, which will likely influence the US economy's trajectory entering 2024, affecting both markets and consumer confidence.
Bitcoin’s Evolving Narrative
Powell's comparison of Bitcoin to gold represents a shift in institutional perception. Following his statements, Bitcoin traded at $98,050, showing a modest 2.13% increase, according to CoinMarketCap.
BTC Price | Source: CoinMarketCap
Jeff Park, an Active Portfolio Manager at Bitwise Asset Management, views Powell's "digital gold" comment as validation for Bitcoin's investment narrative. “From this day forth, you are no longer permitted to ask me to waste my breath and energy on the investment case for Bitcoin,” Park emphasized, highlighting the mainstream acceptance of the cryptocurrency's narrative.