• The Federal Reserve Bank of New York recently concluded that Bitcoin has no intrinsic value and is unresponsive to both monetary and macroeconomic news.
• The report highlighted that Bitcoin cannot be used as a form of payment at scale due to its high volatility.
• Nonetheless, the Fed suggested that Bitcoin shares most of the features of a store of value such as gold.
Federal Reserve Bank: ‚Bitcoin Shares Most of the Features of a Store of Value Such As Gold‘
The Federal Reserve Bank of New York recently released a report concluding that Bitcoin has no intrinsic value and is unresponsive to both monetary and macroeconomic news. Furthermore, the report highlighted that due to its high volatility, Bitcoin cannot be used as a form of payment at scale. However, the Fed suggested that Bitcoin shares most of the features of a store of value such as gold.
Probability Model Indicates That Monetary News Has Larger Effects on Bitcoin Price than Those About Current Target Rate
The report formulated a simple speculative asset model to determine future probabilities related to Bitcoin value. According to this probability model, monetary news negatively affects the speculative asset through an interest-rate channel. Additionally, it was found that monetary news about future policy path has larger effects on Bitcoin price than those regarding current target rate. For instance, an unexpected increase in US inflation may lead to higher input costs for exports which makes nations’ exports less competitive in global markets thus leading to depreciating exchange rates.
Bitcoin Reacts With Increased Volatility Before & After FOMC Statements Touching On Interest Rates
The report also stated that before and after FOMC statements touching on interest rates, there are increased levels in volatility with regards to bitcoin prices. This means investors can expect more volatile pricing when it comes to decisions made by authorities regarding interest rates within different countries.
Crypto Assets Compare To Gold & Other Precious Metals Rather Than US Dollar
The study conducted by The Federal Reserve Bank suggests crypto assets compare more closely with gold and other precious metals rather than the United States dollar since they have similar characteristics when it comes down to storing values over timeframes compared with fiat currencies like US dollars or euros which can experience large fluctuations depending on economic events happening within respective countries or regions they are issued from..
In conclusion, although crypto assets like bitcoin have some advantages over traditional stores of value like gold or silver, their lack responsiveness towards macroeconomic events coupled with their high volatility makes them unsuitable for payments at scale compared with fiat currencies issued by central banks around the world