The US Fed Governor calls Bitcoin “electronic gold,” says crypto is another asset “you can choose to hold. You can choose gold or bitcoin.”
Finally, into the weekend, cryptocurrencies are registering some greens.
After Bitcoin fell under $56k and Ether went below $4k on Friday, today we went as high as nearly $59k and $4,340, respectively. As of writing, BTC/USD is trading around $58,500, and ETH is hovering around $4,300.
The total crypto market is also slowly recovering from $2.59 trillion to back above $2.75 trillion.
“This correction seems more like a natural breather in a bull run, as well as a healthy flushing out of leverage,” said Noelle Acheson of Genesis Global Trading.
While some have started to doubt the bullishness of the market after the recent weakness, money hasn’t stopped flowing into the cryptocurrency industry. While in the private market, crypto firms continue to raise millions and billions of dollars to build the infrastructure, crypto products are also attracting money though the flow has subdued.
“It alludes to the fact that we’re also not overheated at the 60K market. There’s still a good way to go,” said Justin d’Anethan of crypto trading firm EQONEX.
Hunter Horsley, CEO of Bitwise, is of the same opinion based on “fundamental thesis and drivers of the space,” which he says “continue to look incredibly optimistic.”
Even global markets are consolidating after the gains recorded by the US dollar and bond yields in recent weeks.
This year crypto adoption has gone mainstream, with institutions pouring in. Australia is also joining in with its biggest bank, the Commonwealth Bank of Australia, to start offering its users the ability to buy, sell, and hold crypto because the bigger risk is not participating.
However, the county’s $2.4 trillion pension fund industry is still not all aboard. Ross Barry, who oversees A$27 billion at superannuation fund Spirit Super, said long-term funds have to watch how the sector develops, but volatility makes crypto “too risky to be considered for institutional portfolios.”
Not just user adoption, but countries are also recognizing crypto’s potential, with India planning to regulate crypto as an asset class. Also, Brazil’s central bank chief Roberto Campos Neto is saying that they are discussing a bill on how to regulate crypto as an investment class due to Brazilian purchases of bitcoin starting to affect import data.
“They have already started to affect national accounts, which means they have become an important instrument,” he said, adding, he wants to get more clarity on the government’s plan for cryptos.
Campos Neto also said that inflation expectations for next year are rising and shifting “a bit” away from their target, which the bank has been trying to control by raising interest rates. In addition, the Brazilian central bank is likely to revise its forecast for the country’s GDP growth next year to downwards, which currently stands at 2.1%.
“You Can Choose Gold Or Bitcoin”
Besides crypto, gold also fell to a one-week low on Friday, weighed by the gains in the US dollar and after Federal Reserve Board Governor Christopher Waller said Bitcoin is digital gold.
Waller also said the Fed should increase the pace of tapering to give more leeway to raise interest rates from virtually zero. An increase in rates and draining the liquidity from the system, however, is not good for the crypto market as during the last bull market, it “took the wind out of the sails of crypto was when interest rates rose, and liquidity was draining from the system,” said Jamie Cox, managing partner at Harris Financial Group.
On Friday, during a discussion with the Center for Financial Stability, when asked about the risks digital assets pose, Waller said,
“Bitcoin to me is basically electronic gold.”
“It doesn’t have any fundamental intrinsic value, but that’s okay. We’ve known from economics since 1958 that useless objects can have value.”
Most of the thousands of cryptocurrencies in existence have “zero value,” said Waller adding, Bitcoin is different.
“Once they pick up, then they become like electronic gold. They’re another asset you can choose to hold. You can choose gold or bitcoin, I don’t care. We don’t sit there worrying about gold prices destabilizing the financial system, per se.”
Meanwhile, the Fed official sees DeFi presenting new opportunities in terms of smart contracts, which are “amazing” and can be used to do “pretty impressive stuff with,” Waller said.
“There’s instant clearing and instant settlement…. So I think it has actually a lot of potential for trading going forward.”
Earlier this week, Waller also commented on stablecoins, saying while he understands the regulators wanting to force a new product into an old structure that would eliminate stablecoin’s key benefit arrangement of serving as “a viable competitor to banking organizations in their role as payment providers.”