The Federal Reserve Chairman, Jerome Powell, just said that bitcoin is a “speculative store of value” like how gold is used.
It’s a win for proponents of the theory that the US trade war has spurred investors to buy bitcoin as a way to diversify their portfolios.
Trump yesterday slammed bitcoin and other crypto currencies, saying they should be “subject to all banking regulations.”
Click here for more Markets Insider stories.
Federal Reserve Chairman Jerome Powell waded into the debate about bitcoin’s role in the global financial system, adding weight to the theory that it’s a safe haven option for investors.
When answering questions before the senate banking committee on Thursday, Powell was asked: “If a cryptocurrency system became prevalent throughout the globe, would that diminish or remove the need for a reserve currency?”
Powell replied: “Things like that are possible, but we really haven’t seen them, we haven’t seen widespread adoption. Bitcoin is a good example. Really almost no one uses bitcoin for payments, they use it as an alternative to gold, it’s a store of value, a speculative store of value, like gold.”
It’s a win for proponents of the theory that the US trade war with China and disputes with Iran, Mexico, Germany, and other countries have spurred investors to buy bitcoin as a way to diversify their portfolios.
Read more: 5 theories behind bitcoin’s dizzying rally above $12,000
“As the geopolitical situation remains so uncertain, strategic investors are still looking at bitcoin and ethereum as uncorrelated with centralized assets, so they provide a quasi safe-haven option.” said Marcus Swanepoel, CEO of Luno, a cryptocurrency platform.
Some have poured water on that theory: A recent study found cryptocurrencies are vulnerable to the same market forces as conventional assets.
Powell added on Thursday: “People have been talking about this [removing a reserve currency] since cryptocurrencies emerged, and we haven’t seen it, but that’s not to say we won’t see it. But if we do see it we may return to an era in the United States where we saw many different currencies in the national banking era”
Powell’s remarks came before President Trump slammed cryptocurrencies on Thursday, saying in a tweet: “I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air.”
The president also said that Facebook’s Libra will be subject to the same banking regulations …read more
Source:: Business Insider