Fed: Bitcoin Shares Features of a Store of Value Like Gold

• The Federal Reserve Bank of New York recently conducted a study that concluded that Bitcoin does not correlate with macroeconomic factors and is unresponsive to both monetary and macroeconomic news.
• The report highlighted that Bitcoin cannot be used as a form of payment due to its high volatility and compares more to Gold and other precious metals than the United States Dollar.
• The report also indicated that monetary news about the future path of policy has larger effects on Bitcoin price than those about the current target rate.

Federal Reserve Bank Study

The Federal Reserve Bank of New York recently conducted a study into the behavior of Bitcoin when exposed to macroeconomic news, concluding that it doesn’t correlate with such events in comparison to other asset classes like precious metals, and the S&P 500.

Bitcoin Unresponsive To News

The Fed provided a model that shows Bitcoin as an asset with no intrinsic value for which its current price depends on the discounted value of its future price. The Fed concluded that Bitcoin is unresponsive to both monetary and macroeconomic news.

Bitcoin Compared To Gold

The report highlighted that Bitcoin cannot be used as a form of payment at scale due to its high volatility. As such, Bitcoin and other crypto assets compare to Gold and other precious metals rather than the United States dollar.

Effect Of Monetary News On Price

The speculative probability model indicated that monetary news about the future path of policy has larger effects on Bitcoin price than those about the current target rate. For instance, an unexpected increase in US inflation may lead to higher input costs for exports, which then makes a nation’s exports less competitive in the global markets; consequently leading to increased volatility before and after FOMC statements touching on interest rates.

Conclusion

In conclusion, this study conducted by the Federal Reserve Bank of New York highlights how cryptocurrency shares many features with gold as a store of value but can’t be used as a form of payment due to its high volatility when compared against fiat currency or other asset classes like stocks & bonds. Furthermore, it was found that monetary news about the future path of policy has larger effects on Bitcoin price than those about the current target rate.