Federal Reserve Chairman Jerome Powell during the New York Times DealBook Summit at Jazz at Lincoln Center in New York, USA, on Wednesday, December 4, 2024.
Yuki Iwamura | Bloomberg | Getty Images
Bitcoin's meteoric rise may have received additional impetus from an unlikely source: Federal Reserve Chair Jerome Powell.
In his comments on cryptocurrency on Wednesday, the central bank chief noted that he does not and cannot own any cryptocurrency himself. Additionally, he said the Fed's role in regulating Bitcoin and its competitors is limited.
However, he also insisted Bitcoin is not a challenge for traditional currencies like the US dollar, but rather for gold.
“People are using Bitcoin as a speculative asset,” Powell told CNBC’s Andrew Ross Sorkin during The New York Times’ DealBook Summit. “It's just like gold, only it's virtual, it's digital. People don't use it as a means of payment or as a store of value. It is very volatile. It’s not a competitor to the dollar, it’s really a competitor to gold.”
For those watching the crypto markets, the Powell comments have, albeit unwittingly, provided a sense of legitimacy for Bitcoin and helped push it even higher. Bitcoin rose 3% in morning trading on Thursday, crossing $103,000 before falling slightly.
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The rise of Bitcoin
“We believe the Fed Chair’s comparison of Bitcoin to gold is a significant development as it adds another level of credibility to Bitcoin as a key asset in global markets,” said Joel Kruger, market strategist at LMAX Group, the a currency and currency exchange engages in crypto trading.
“The fact that gold is still around 10 times the size of Bitcoin should provide additional insight into how much more room there is for Bitcoin to grow from current levels,” he added.
Bitcoin rose sharply at the start of the year and then largely moved in a volatile but fairly narrow range until Donald Trump won the presidential election on November 5th. It has since risen nearly 50% as the president-elect's pro-crypto comments sparked another price surge that pushed Bitcoin above $100,000 late Wednesday. In contrast to Gold has been virtually unchanged since the election, although it is up almost 30% since the start of the year.
However, it is not known to what extent Powell's comments spurred the final step.
The comments comparing it to Bitcoin came on the same day Trump made official his highly anticipated intention to appoint financier Paul Atkins, also a strong crypto proponent, as chairman of the Securities and Exchange Commission.
The position is an important regulatory post and could ensure smoother market development, especially since current SEC head Gary Gensler is an opponent of the crypto industry.
