Bitcoin’s negative price action on Monday seems to come at least partly in response to comments from Federal Reserve Chairman Jay Powell in a panel discussion with other central bankers hosted by BIS.
That the chief guardian of the US dollar says that Bitcoin will not be a substitute for the Greenback should come as absolutely no surprise at all. What IS more surprising is Powell’s statement that Bitcoin can be a substitute for gold.
This highlights how central bankers have gone from dismissing Bitcoin as a bubble or Ponzi scheme in the recent past, to gradually albeit very reluctantly accepting that cryptocurrencies will play an inevitable role in the global monetary framework.
From challenging the legality of Bitcoin, central bankers are now only challenging the cryptocurrency’s volatility. This is nothing less than a tacit admission on the part of the central bankers that it lies outside their powers to regulate cryptocurrencies out of existence.
Meanwhile, as Powell and BIS boss Carstens keep on repeating that “Bitcoin is backed by nothing”, the ECB stepped up its bond buying to €21,1 billion in the week to March 17th – the highest rate in three months. The pandemic may end, quantitative easing will go on.