Bitcoin, Gold, and the Dollar: A Thoughtful Perspective from Fed Chair Jerome Powell
U.S. Federal Reserve Chair Jerome Powell recently shared his candid thoughts on Bitcoin, likening the cryptocurrency to gold. These remarks came during his appearance at The New York Times’ DealBook Summit, where Bitcoin’s value is inching towards a breathtaking landmark of $100,000. Powell’s perspective on Bitcoin paints a picture of the cryptocurrency’s role in the financial ecosystem, juxtaposed against traditional assets like gold and fiat currencies, particularly the U.S. dollar.
Reflecting on Bitcoin’s primary use case, Powell observed, “People use Bitcoin as a speculative asset, right? It’s like gold. It’s just like gold only it’s virtual, it’s digital.” Here, Powell underscores Bitcoin’s digital nature while emphasizing its similarity to gold as a vehicle for speculation rather than a medium of exchange. To emphasize the point further, he asserted that Bitcoin is far from being a practical form of payment due to its extreme volatility, a trait that limits its use in daily transactions. “It’s not a competitor for the dollar,” he explained, firmly stating that Bitcoin functions more as a “competitor for gold.” By implying that Bitcoin exists in the realm of speculative investing rather than as a foundational currency, Powell carves out its distinct place in the financial landscape.
Interestingly, this isn’t Powell’s first acknowledgment of Bitcoin’s staying power. Back in June 2023, the Fed Chair reportedly told lawmakers that Bitcoin does exhibit resilience—a nod to its ability to maintain relevance despite market swings and regulatory skepticism. Now, with Bitcoin’s price approaching extraordinary levels, riding on the back of significant developments within the U.S. political arena, its staying power seems more evident than ever.
Bitcoin’s Meteoric Rise and a Pro-Crypto Presidency
Bitcoin’s recent surge in value has not materialized in a vacuum; it coincides with a politically fertile environment for the cryptocurrency industry. Following the U.S. presidential election in early November, where Donald Trump emerged as the president-elect, Bitcoin’s value has approached the euphoric level of $100,000, a milestone unthinkable just years ago. Trump’s expressed support for the crypto industry has brought renewed attention to digital currencies. Back in July, he declared himself to be the “pro-Bitcoin candidate that America needs,” demonstrating an inclination to foster crypto innovation rather than stifle it with excessive regulation.
Earlier on the same day as Powell’s remarks, Trump made another move that resonates with the crypto community: he appointed former regulator Paul Atkins as the chair of the U.S. Securities and Exchange Commission (SEC). Atkins, known for his crypto-friendly stance, previously served as an adviser to The Digital Chamber in 2020. This appointment signals continuity in the administration’s willingness to engage positively with the burgeoning crypto industry. For Bitcoin and the broader market, such developments point to a more enthusiastic regulatory environment, paving the way for further growth and innovation.
As of Wednesday afternoon, Bitcoin was trading at approximately $97,400, according to data from The Block. This near-record value fuels the ongoing debate about Bitcoin’s role in an increasingly digitalized economy and the broader narrative of its legitimacy as an asset class.
The Fed’s Role in Crypto and Powell’s Personal Stance
During the DealBook Summit, Andrew Ross Sorkin, the journalist moderating the discussion, pivoted the conversation to the Federal Reserve’s role in the crypto space. Powell clarified that while the Fed does not regulate cryptocurrencies directly, it keeps a watchful eye on the interactions between the crypto sector and traditional financial institutions. “We would want the interaction between the crypto business and the banks to not threaten the health and well-being of the banks,” Powell remarked, underscoring the central bank’s cautious yet pragmatic approach. This perspective acknowledges the interconnected nature of the financial ecosystem, where instability in one area—such as the burgeoning crypto sector—could ripple out to affect the broader banking system.
When asked about his personal involvement with cryptocurrency, Powell was unequivocal, stating, “I’m not allowed to.” His response reflects the ethical constraints placed on federal officials in sensitive positions, ensuring their impartiality in matters that could influence policy or the market.
Political Tensions: Trump and Powell on Inflation and Independence
On the political front, tensions between Powell and president-elect Trump have not been a secret. Trump has been openly critical of Powell in the past, particularly regarding the Federal Reserve’s handling of inflation. Despite the friction, Powell remains steadfast in his commitment to the Fed’s independence. Last month, he firmly asserted that he would not resign if Trump asked him to, pointing out that such a move would not be “permitted under the law.” As an independent agency, the Federal Reserve is explicitly designed to shield itself from political pressures—a principle enshrined in its foundational mission to prioritize long-term economic stability over short-term political expediencies.
Powell’s remarks at the Summit offer a glimpse into the intricate dynamics surrounding Bitcoin, the evolving crypto landscape, and the balancing act required of monetary authorities in navigating these changes. As Bitcoin continues to push the boundaries of innovation and value, a narrative emerges not only of its competition with gold but also of its potential to reshape perspectives in finance and governance.
