Bitcoin has taken a nasty hit in recent days. The world’s number one digital currency by market cap – which was previously trading in the $58,000 and $59,000 ranges – has stumbled backwards and is now trading for around $55,000. Earlier today, we published an article suggesting that the expiration of various bitcoin options was to blame, though there may have been another contributing factor. Jerome Powell – chair of the Federal Reserve – released an official statement on the world’s primary digital asset, taking a hit at its ongoing volatility.
Jerome Powell Isn’t a Fan of BTC’s Volatility
One of the big problems with bitcoin is the fact that it’s so vulnerable to price swings. The currency has been hit time and time again with this argument, but the truth is that it holds a lot of weight. Ever since the currency was first introduced to the public 12 years ago, it seems it cannot get a hold on where it wants to be. It goes up and down faster than the rising sun, and this has prevented it from achieving the mainstream status it’s always wanted.
For example, bitcoin was initially created to serve as a form of payment; a tool that would replace fiat currencies and could be utilized as a means of paying for goods and services. While there are a few outlets out there such as Overstock.com that have fallen in line with this vision and accept BTC alongside credit cards and cash, many have turned their backs on the asset claiming that it puts them in a rough position, and to an extent, we can’t really blame them.
Consider this scenario: you walk into a store and buy $50 worth of merchandise with bitcoin. Tomorrow, the price of BTC goes down and the store hasn’t converted it to cash yet. Thus, that $50 you paid with turns into $40. While you still get to walk away with everything you bought, the retailer loses money, which isn’t entirely fair to them or their staff.
This volatility has caused many to look down on BTC, and it looks like Jerome Powell is no exception. In a recent interview, he claimed that bitcoin was “not really useful as a store of value,” and referred to all cryptocurrencies as “highly volatile.”
In his statement, he says of cryptocurrencies:
They’re more of an asset for speculation, so they’re also not particularly in use as a means of payment… It’s essentially a substitute for gold rather than for the dollar, and I think with crypto assets, the public needs to understand the risks.
Stable Currencies Might Be Better…
While he doesn’t think much of bitcoin and standard crypto, Powell did comment that he felt stable currencies could ultimately play integral parts in the future of finance, claiming:
Stable coins may have a role to play with appropriate regulation.