Yesterday, bulls charged the crypto market, which caused Bitcoin to add $9B to its market capitalization in less than thirty minutes. But the Fed chairman on crypto is swinging the opposite way.
Today, we’ve seen a few bears emerge from the forest. Specifically, the head of the Federal Reserve spoke on cryptocurrencies today, providing comments that indicate he is bearish on virtual currencies.
Fed Chairman on Crypto: A Risky Investment
On Wednesday, Jerome Powell, the head of the Federal Reserve, which is the US’s central banking system, spoke with members of Congress. During the talks, Powell told Congress that cryptocurrencies present grave risks to investors.
When talking about bull runs, a conversation likely stirred by what happened on Tuesday, Powell said that “unsophisticated investors” will charge the market when the digital asset goes up in price, assuming “this is great; I’ll buy this.” However, according to Powell, “there is no promise of that.”
Despite the popularity of the crypto industry, which earned mainstream interest in 2017, Jerome Powell believes that cryptocurrencies are not real currencies—and he’s not afraid for members of Congress to know this.
Because cryptocurrencies lack intrinsic value, Powell explained, they are not real currencies.
Here’s where Jerome Powell may lose some people:
While it’s true that there are a lot of naive investors in the sector, primarily due to the industry being a ‘learn as you go’ sort of deal (the CFA is trying to change this by adding crypto on the CFA exam), Powell claims that cryptocurrencies have no intrinsic value, which is true. But, and there is a but, this isn’t as bad as it may seem.
Why? Well, because nothing has intrinsic value, as value is subjective. So yes, cryptocurrencies may not have this value, but neither does, for example, gold.
If you’re interested in banking, or the financial sector in general, you might feel divided as to what to believe.
Powell claims the industry is full of inexperienced investors who charge the market when the price shoots up, without thinking about the consequences, and that these currencies are not real.
But is he right? Regarding Powell’s thoughts on value, one could argue that he is. However, it’s difficult to ignore the fact that the industry could be more sophisticated. Even the CEO of Dash Pay said last month that there is a “lack of business maturity” in the sector.
Speaking of cryptocurrencies and bulls runs, how is Bitcoin (the OG of cryptocurrencies) doing today?
Better than it has been doing for the past month, that’s for sure. At press time, Bitcoin is selling for $7,423.59, which means the coin is up 8.48% in the past twenty-four hours.
The Fed chairman gives his take on cryptocurrencies, but does he make valid points? Let us know in the comments below if you agree or disagree with the Fed chairman on crypto.
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