Jerome Powell Labels Bitcoin as the New ‘Digital Gold’: An Incremental Approach in Progress

Key Points

• Jerome Powell, U.S. Federal Reserve Chair, acknowledges Bitcoin’s potential as a store of value but rejects it as a dollar competitor.
• Inflationary pressures and the Fed’s stance on rate cuts are posing challenges to the next Bitcoin rally.

Jerome Powell, the Chair of the U.S. Federal Reserve, has shown a change in his stance towards Bitcoin [BTC] . This shift has stirred a sense of optimism in the cryptocurrency market.

Powell’s Perspective on Bitcoin

In a recent conversation with Andrew Ross Sorkin at the New York Times DealBook Summit, Powell likened Bitcoin to gold. He stated that people use Bitcoin as a speculative asset, similar to gold, but it’s virtual and digital. However, he added that Bitcoin is not a competitor for the dollar due to its high volatility and limited adoption as a payment method.

Changpeng Zhao (CZ), the founder of Binance [BNB] , praised Powell’s shift in stance, calling it an improvement to the previous narrative.

Macroeconomic Factors Affecting Bitcoin

The broader macroeconomic landscape is adding pressure to risk assets, including cryptocurrencies. The U.S. Consumer Price Index (CPI) report showed inflation rising to 3% in January, and the Producer Price Index (PPI) surged to 3.5%, its highest level since February 2023.

With mounting inflationary pressures and the Federal Reserve refraining from rate cuts, the expected crypto bull cycle seems to have encountered a hurdle. However, crypto prices showed resilience as the week ended, leading to speculation about potential market rebounds.

Powell’s firm stance against renewed Quantitative Easing (QE) and commitment to Quantitative Tightening (QT) has sparked discussions within the crypto community. His testimony on February 11th reinforced that the Fed would only consider QE under extreme conditions, such as near-zero interest rates.

Despite the challenges posed by inflation and rate cuts, Powell’s evolving view on Bitcoin as a store of value continues to inspire optimism. This leaves investors speculating on how future monetary decisions might shape the digital asset landscape.