Jerome Powell, Chairman of the Board of Governors of the Federal Reserve System, attends 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 an additional boost from an unlikely source: Federal Reserve Chairman Jerome Powell.
In comments on cryptocurrencies on Wednesday, the central bank leader said he does not own and cannot own cryptocurrencies. Additionally, he said the Fed's role in regulating Bitcoin and its competitors is limited.
However, he also argued that Bitcoin is not a challenge to traditional currencies such as the US dollar, but rather to gold.
“People are using Bitcoin as a speculative asset,” Powell told CNBC's Andrew Ross Sorkin at the New York Times' Dealbook Summit. “It’s the same as gold, only virtual, just digital. People aren’t using gold as a means of payment or a store of value. It’s very volatile. It’s not a competitor, it’s actually a competitor for money.”
For those watching the crypto market, Powell's comments gave Bitcoin a sense of legitimacy, if only unwittingly, and helped push it even higher. Bitcoin rose 3% in Thursday morning trading to above $103,000 before falling slightly.
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Bitcoin rise
“We believe the Fed Chairman's comparison of Bitcoin and gold is an important development that takes Bitcoin's credibility as a major asset in global markets to a new level.” said Joel Krueger, market strategist at LMAX Group. Cryptocurrency trading.
He added: “The fact that gold is still around 10x more expensive than Bitcoin will provide further insight into how much room Bitcoin has to grow from current levels.”
Bitcoin soared at the beginning of the year, then traded within a generally volatile but fairly narrow range until Donald Trump won the November 5 presidential election. Since then, Bitcoin has soared nearly 50% as the president-elect's pro-crypto comments spurred further price increases, with Bitcoin passing the $100,000 milestone late Wednesday. By contrast, gold has been roughly flat since the election, but is up nearly 30% year-to-date.
To be sure, it's unclear how much Mr. Powell's comments helped propel the final move.
The comments comparing it to Bitcoin formalized President Trump's widely anticipated intention to nominate investor Paul Atkins, who is also a strong supporter of cryptocurrencies, to head the Securities and Exchange Commission. It was held on the same day.
The position is a key regulatory post and could result in a smoother market ride, especially since current SEC leader Gary Gensler is opposed to the cryptocurrency industry.
