Main Points:
- Bitcoin competes with gold, not the US dollar.
- Bitcoin is a speculative asset, volatile and unsuitable as a payment or store of value medium.
- Bitcoin’s price rise has significantly outpaced gold in recent years.
- Powell dismisses the notion of Bitcoin as a symbol of distrust in the Federal Reserve or US dollar.
- Cryptocurrency companies can work with banks under strict regulations.
- Bitcoin reaches an all-time high, nearing $100,000 due to political developments.
- Pro-crypto cabinet appointments under Trump could reshape US cryptocurrency policy.
Bitcoin as a Rival to Gold
Jerome Powell, Chair of the Federal Reserve, reiterated his stance that Bitcoin is not a threat to the US dollar but a direct competitor to gold. Speaking at the New York Times DealBook Summit on December 4, Powell emphasized Bitcoin’s speculative nature, comparing it to gold but highlighting its virtual and digital attributes. He stated, “People aren’t using it as a payment system or a store of value. It’s highly volatile. It’s not a competitor to the dollar; it’s more like a competitor to gold.”
This is not the first time Powell has drawn parallels between Bitcoin and gold. In March 2021, during an event hosted by the Bank for International Settlements, he described Bitcoin as highly speculative with no intrinsic backing. Since then, Bitcoin’s value has surged by 70%, outpacing gold’s 52% rise, demonstrating the growing interest in digital assets.
Bitcoin and Trust in the Dollar
Powell dismissed claims that Bitcoin’s popularity stems from a lack of trust in the Federal Reserve or the US dollar. He argued that such perceptions do not align with reality, countering narratives that Bitcoin represents a hedge against systemic risks posed by central banking policies. When asked by journalist Andrew Ross Sorkin if he owns Bitcoin, Powell humorously replied that he is “not allowed” to own it, maintaining the ethical boundaries expected of a public official.
Regulatory Stance on Cryptocurrencies
Despite his critical view of Bitcoin as a speculative asset, Powell noted that cryptocurrency companies could engage with banks provided their activities do not jeopardize financial stability. He stressed the importance of consumer protection while acknowledging that the Federal Reserve does not directly regulate this domain. His balanced approach hints at a potential regulatory framework that permits innovation without compromising systemic integrity.
Bitcoin’s Price Surge: Factors Behind the Rally
Bitcoin reached an all-time high of $99,329 on December 4, approaching the symbolic $100,000 mark. Analysts attribute this surge to the political momentum following Donald Trump’s victory in the US presidential election. The prospect of a crypto-friendly administration, featuring figures like Scott Bessent as Treasury Secretary and Howard Lutnick as Commerce Secretary, has buoyed investor sentiment. If realized, this could be the most pro-crypto cabinet in US history.
Political Shifts and Crypto Policies
Trump’s administration may mark a turning point in US cryptocurrency policy. Reports suggest that Trump has been critical of Powell’s monetary decisions, but Powell has firmly stated he will not resign even if Trump seeks his removal. Meanwhile, Trump has nominated Paul Atkins, a cryptocurrency advocate, to replace Gary Gensler as the Chair of the Securities and Exchange Commission. Atkins’ appointment could herald a more favorable regulatory landscape for digital assets.
Bitcoin’s Growing Role
Jerome Powell’s remarks underscore Bitcoin’s evolving identity as a digital alternative to gold rather than a replacement for fiat currencies like the US dollar. While its speculative nature and price volatility remain points of concern, Bitcoin’s increasing valuation and institutional acceptance suggest it is carving out a unique niche in the global financial ecosystem. The political developments under Trump’s administration further highlight the growing significance of cryptocurrencies in shaping economic policies.
Bitcoin’s journey reflects a broader shift toward digital assets as viable investment instruments. As the market matures, striking a balance between innovation and regulation will be crucial to ensuring its sustainable growth.
