Fed Concludes: Bitcoin Shares Features of Store of Value, Like Gold
• The Federal Reserve Bank of New York conducted a study concluding that Bitcoin has no intrinsic value and is not responsive to monetary or macroeconomic news.
• The report highlighted that the asset class of Bitcoin shares most of its features with gold, a store of value, rather than the US dollar.
• The report concluded that Bitcoin reacts with increased volatility before and after FOMC statements concerning interest rates.
Federal Reserve Bank Report on Bitcoin
The Federal Reserve Bank of New York conducted a study recently which concluded that Bitcoin has no intrinsic value and its current price depends on the discounted value of its future price. Furthermore, the report highlighted that Bitcoin shares most of its features with gold as a store of value, rather than the US dollar. Additionally, when it comes to macroeconomic news, the report found that Bitcoin responds more strongly to FOMC statements concerning interest rates compared to other asset classes like precious metals and S&P 500.
No Intrinsic Value
The Fed provided a model which shows Bitcoin as an asset with no intrinsic value for which its current price depends on the discounted value of its future price. According to this model, several hypotheses were derived including that monetary news negatively affects the value of speculative assets through an interest-rate channel. This implies that when there is an unexpected increase in US inflation, it may lead to higher input costs for exports which then make a nation’s exports less competitive in global markets – resulting in decreased demand and thus lower prices for cryptocurrencies such as Bitcoin.
Comparison with Other Assets
The recent study conducted by the Federal Reserve Bank concluded that crypto assets compare to gold and other precious metals rather than fiat currency (the US Dollar). Moreover, it was found that crypto assets are unresponsive to both monetary and macroeconomic news when compared to other asset classes like precious metals and S&P 500 index.
Volatility & Use as Payment
Despite sharing similar features with gold as a store of value, there is one major downside – cryptocurrency’s high volatility rate makes it impractical for use at scale as payment or currency in everyday transactions due to large fluctuations in their values over short periods time.
In conclusion, according to this study by Fed’s researchers, crypto assets such as bitcoin share similarities with gold as a store of value but cannot be used at scale due to their high volatility rate making them impractical for use as payment or currency in everyday transactions .