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Don’t expect the Fed to embrace Bitcoin anytime soon.
Federal Reserve Chairman Jerome Powell, speaking at a virtual panel discussion on digital banking hosted by the Bank for International Settlements, brushed off cryptocurrencies and their recent spike in price, saying the central bank is keeping its focus on more traditional investments.
“It’s more a speculative asset that’s essentially a substitute for gold rather than for the dollar,” said Powell.
Bitcoin prices were down more than $465 in midday trading Monday, but the crypto is still trading at $57,112. Year to date, Bitcoin has seen its value soar 96%—and at least one pattern predicts it will hit $70,000 before long.
Those prices have surged almost 600% since the start of 2020 with extreme volatility, but bears—including Big Short investor Michael Burry—argue cryptocurrencies are in a speculative bubble. And Powell seems to agree.
“They’re highly volatile and therefore not really useful stores of value, and they’re not backed by anything,” Powell said.
While the central bank isn’t a fan, more investment banks are becoming interested. Citibank last November said Bitcoin could pass $300,000 by the end of 2021. JPMorgan is less bullish, though, saying it could reach as high as $146,000 “in the long term.” (That in itself was notable, as CEO Jamie Dimon once called Bitcoin a “fraud.”)
The Federal Reserve has looked into creating its own digital currency, but Powell said any movement on that would be done “with great care and transparency” and would likely need the blessing of Congress to proceed.
In the meantime, Bitcoin’s value continues to exceed many top-tier companies, including Facebook. According to CoinGecko, there are now 18.6 million Bitcoins in circulation, giving the digital currency a market cap of over $1 trillion.