The United States Reserve chair, Jerome Powell, explained his thoughts about Bitcoin’s similarities to gold. Many people know Bitcoin as digital gold due to its similarities with the yellow metal and its outstanding performances over the years. The digital asset continues to pave the way for other assets, which has led to the belief that Bitcoin is the most popular digital asset globally.
The leader explained that people could choose to substitute gold with Bitcoin, especially with the growing belief that crypto is the digital form of gold. Despite his optimistic outlook on gold, he didn’t forget to add that Bitcoin is highly volatile, which means that it fluctuates at an alarming rate.
Powell calls Bitcoin a speculative asset
While volatility has helped Bitcoin grow in size and threaten its value in the long run, the leader spoke during the Bank of International Settlement Innovation Summit and mentioned that Bitcoin was a speculative asset. This view is correct about many investors who speculate on the digital asset to assure greater gains quickly.
He explained that the asset is volatile, meaning that it is not an efficient value store and not backed by anything. Powell’s view is that Bitcoin is an investment for speculation and cannot be effective payment means. The head believes that Bitcoin can only substitute gold and cannot replace the dollar, one of the world’s most stable currencies.
The COVID-19 pandemic caused an unexpected economic crash in America in 2020 and contributed to the dollar’s weakening for some time. The head of America’s central bank has called Bitcoin a speculative asset on so many occasions while linking it to gold. Apart from drawing similarities to gold and Bitcoin, he believes that the crypto has no chance of replacing the USD.
The financial expert explained that there are many processes involved in getting digital assets. He raised problems like volatility, the power that miners need for their operation, and their lack of backing to anything tangible.
Governments feel threatened by digital assets
While admiring the development of stablecoins as they continue to be one of the most used means for cross-border payments, the chairman believes that even the coins cannot replace the dollar in the global monetary system. The dollar is the most used currency globally due to its wide acceptability and its function in global markets.
Unlike Bitcoin and Ethereum, stablecoins were created to maintain a certain level of stability as its usually pegged against a real currency, which is usually the USD. When Facebook’s Diem announced plans to create a payment system that would facilitate cross-border payments and other benefits, many nations like Germany refused the creation.
The Diem project has gone through several issues: the lack of a clear regulatory framework regulating the system, causing fear in world leaders. The United States, like other nations, has announced that it would regulate stablecoins and other cryptocurrencies. The recently held summit also had discussions centered around the Central Bank Digital Currency and the growing number of nations showing interest.
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