London, UK, 5th Feb 2022, Binary News Network, The Federal Reserve raised interest rates for the fourth time in 2018, but Fed officials appeared ready to raise rates again at their meeting last month.
In a letter sent Wednesday evening to Rep. Carolyn Maloney (D-N.Y.), Powell said the committee minutes from its Dec. 18-19 meeting would be released “promptly” after a review by the bank for any classified information.
FinancialCentre broker, Jessica Grey, says the Fed has raised interest rates eight times since 2015 as the American economy recovers from the 2008 financial crisis. The nation’s unemployment rate is now at its lowest level in nearly 50 years, and inflation measures have been within the Fed’s target range recently as well.
When asked whether he wants to remain Fed chairman, Powell told CNBC’s Steve Liesman that “of course” he does.
As the risk assets took hits on Wednesday, bitcoin and other cryptocurrencies followed suit.
The major cryptocurrencies were under pressure on Thursday after comments from Fed Chairman Jerome Powell.
At the U.S. House Financial Services Committee, Powell said that the Federal Reserve would be reviewing and releasing minutes from its Dec. meeting “promptly.”
While speaking about cryptocurrency regulation, Powell stated: “I think our biggest focus is to make sure that we don’t stifle innovation and that we don’t make the mistakes of the past.”
Notably, he added: “If you look at where cryptocurrencies are being used today, it’s not a stable store of value. And so, if you put your money in the bank, you know how much it’ll be worth tomorrow. If you put your money in bitcoin, the blockchain technology, you’re making a bet that somebody who wants to manipulate these things will be successful at doing so. It’s not a stable store of value, and if it were the case, there would be no reason for people to put their money in it.”
The remarks come after bitcoin prices dropped below $3,500 for the first time since early January. The cryptocurrency has lost over 50% of its value this year.
One oft-touted use case for cryptocurrencies is as a store of value when fiat currencies are becoming less predictable in value.
The European Central Bank (ECB) President Mario Draghi also reiterated that cryptocurrencies were not a threat to the central bank’s current financial system.
Like Powell, he said: “In the ECB’s view, these digital currencies do not and will not challenge the dominance of the U.S. dollar, given their very small size, and given the fact that they are not part of the euro area’s payment system.”
On Wednesday, stocks were under pressure as investors reacted to comments from Powell. The Dow Jones Industrial Average fell almost 300 points after the central bank signaled it wanted rates to rise faster than previously expected.
Bitcoin dropped below $3,500 for the first time since early January. The cryptocurrency has shed over 50% of its value this year.
Bitcoin is currently trading at $38,439, down -4% on a 24-hour basis. Bitcoin’s market cap is at more than $65 billion.
What are the problems with Bitcoin?
In a nutshell, the problem is wild volatility. In 2012, prices jumped from$13 from $266, then crashed to $50 before rallying above$1,000 in January 2014. The price took another plunge in the second half of 2014 and spent much of 2015 below $200. Finally, in 2017, bitcoin rallied more than 1,300% and hit a record high of $19,783 in December.
A little more than half of the bitcoins are held by investors. Roughly 10% belong to early adopters, and the rest have never been traded or mined, representing fresh supply. There are no barriers to entry means bitcoin is vulnerable to being pumped and dumped.
Bitcoin has an ill-defined inflation schedule, with early versions allowing for none. The total bitcoin is capped at 21 million, so the currency cannot be debased as traditional currencies can. A big part of its value is based on scarcity, and most people who buy bitcoins aren’t doing so to use them in transactions (which are few and far between) but rather because they expect other people to pay more for them later.
Bitcoin is very slow compared with other forms of payment – you need at least an hour to transfer bitcoins from one wallet to another, which might be fine for high-value transactions but isn’t OK if you want to buy a coffee with it. Only six of the top 500 online retailers accept it.
The blockchain technology behind bitcoin works well, but you just can’t get away from the fact that bitcoins are no more useful than Monopoly money for everyday purposes.
Bitcoin transactions are slow and expensive compared with other forms of payment. Because there’s no central bank backing up the currency, it can feel more like a speculative investment than an equivalent of money.
As originally envisioned, Bitcoin has proved not to be the internet’s version of gold. Rather it looks more like tulip mania 2.0 – and after the crypto winter set in, we know how that ended (hint: badly).
Bitcoin is not a physical asset with intrinsic value. It has no use in production and is entirely just a means of exchange.
It has value only to the extent that people are willing to hold it. As soon as people try to get rid of it, its price will fall through the floor.
Bitcoins have been used for some purchases, but they are now too slow and expensive for this purpose.
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