One odd source may have contributed to Bitcoin’s explosive rise: Jerome Powell, the chair of the Federal Reserve.
The head of the central bank stated Wednesday that he does not and is unable to possess any cryptocurrency. He said that the Fed has little authority to regulate bitcoin and its rivals.
But he also insisted that gold, not conventional currencies like the US dollar, is the real threat from bitcoin.
During the New York TimesDealBook Summit, Powell told Andrew Ross Sorkin of CNBC that people use bitcoin as a speculative asset. It is similar to gold, except it is digital and virtual. It isn’t being used as a store of value or as a means of payment. It’s quite erratic. In actuality, it is a rival for gold rather than the dollar.
Whether intentionally or not, Powell’s remarks gave bitcoin credibility and contributed to its recent surge in value, according to many who follow the cryptocurrency markets. In Thursday morning trading, Bitcoin surged 3%, crossing the $103,000 barrier before a modest decline.
Bitcoin’s rise
Joel Kruger, market strategist at LMAX Group, which operates a currency and cryptocurrency exchange, stated, “We think the Fed chair’s comparison of bitcoin to gold is a significant development as it introduces another level of credibility to bitcoin as a major asset in global markets.”
He went on to say that the fact that gold is still around ten times bigger than bitcoin should provide more evidence of how much more space there is for it to expand from its current levels.
After a strong start to the year, Bitcoin mostly traded in a volatile but relatively narrow range until Donald Trump won the presidential election on November 5. The president-elect’s pro-crypto comments sparked another price spike that saw bitcoin surpass $100,000 late Wednesday, and it has since surged by about 50%. On the other hand, although gold has increased by about 30% this year, it has remained relatively unchanged since the election.
It’s unclear, to be sure, how much Powell’s remarks influenced the final outcome.
The comments likening it to bitcoin were made on the same day that Trump formally announced his intention to propose Paul Atkins, a billionaire and ardent advocate of cryptocurrency, to be the Securities and Exchange Commission’s head.
Given that Gary Gensler, the current head of the SEC, has been against the cryptocurrency sector, the role is a crucial regulatory role that might facilitate a more stable market.
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