Bitcoin’s meteoric run may have gotten a little extra push from an unlikely source: Federal Reserve Chair Jerome Powell.
In comments Wednesday about the cryptocurrency, the central bank leader noted that he does not and cannot own any himself. In addition, he said the Fed’s role in regulating bitcoin and its competitors is limited.
However, he also maintained that bitcoin is not a challenge for traditional currencies such as the U.S. dollar but rather for gold.
“People use bitcoin as a speculative asset,” Powell told CNBC’s Andrew Ross Sorkin during the New York Times’ DealBook Summit. “It’s just like gold, only it’s virtual, it’s digital. People are not using it as a form of payment or as a store of value. It’s highly volatile. It’s not a competitor for the dollar, it’s really a competitor for gold.”
For those who watch the crypto markets, the Powell comments, whether unwittingly, provided a sense of legitimacy for bitcoin and helped drive it another leg higher. Bitcoin jumped 4% in morning trade Thursday, pushing over the $103,000 mark.
“We believe the Fed chair’s comparison of bitcoin to gold is a significant development as it introduces another level of credibility to bitcoin as a major asset in global markets,” said Joel Kruger, market strategist at LMAX Group, which runs an exchange for currency and crypto trading.
“The fact that gold is still about 10 times larger than bitcoin should offer additional insight into how much more room there is for bitcoin to grow from current levels,” he added.
Bitcoin rose sharply to start the year then largely traded in a volatile but fairly tight range — until Donald Trump won the Nov. 5 presidential election. Since then, it has soared close to 50% as the president-elect’s pro-crypto remarks fueled another price surge that took bitcoin past the $100,000 mark late Wednesday. By contrast, gold is about flat since the election, though it is up nearly 30% year to date.
To be sure, how much Powell’s comments helped propel the last move is unknown.
The remarks comparing it to bitcoin came the same day Trump made formal his widely anticipated intention to nominate financier Paul Atkins, also a strong crypto supporter, as chair of the Securities and Exchange Commission.
The position is a key regulatory post and could provide a smoother market ride, particularly since the current SEC leader, Gary Gensler, has been an opponent of the crypto industry.