TLDR
Federal Reserve Chair Jerome Powell now views Bitcoin as a digital equivalent to gold, marking a shift from his previous stance
Powell maintains Bitcoin cannot compete with USD due to volatility and limited payment adoption
U.S. inflation rose to 3% in January with PPI at 3.5%, highest since February 2023
Fed remains committed to Quantitative Tightening, rejecting new Quantitative Easing
Binance founder CZ praised Powell’s evolving perspective as “baby steps”
Federal Reserve Chair Jerome Powell has shifted his perspective on Bitcoin, drawing parallels between the cryptocurrency and gold while maintaining his position that it cannot rival the U.S. dollar. The comments came during a discussion with Andrew Ross Sorkin at the New York Times DealBook Summit.
Powell’s remarks represent a change in tone from his earlier, more cautious approach to Bitcoin. “People use Bitcoin as a speculative asset, right? It’s like gold. It’s just like gold only. It’s virtual. It’s digital,” Powell stated during the summit.
The Federal Reserve chief went on to explain his view of Bitcoin’s current role in the financial system. He pointed out that people are not widely using Bitcoin for payments or as a traditional store of value. Powell emphasized Bitcoin’s high price volatility as a key factor that prevents it from becoming a true competitor to the U.S. dollar.
Binance founder Changpeng Zhao, commonly known as CZ, responded positively to Powell’s new characterization of Bitcoin. CZ described the shift in Powell’s narrative as “baby steps,” suggesting this represents progress in how traditional financial leaders view cryptocurrency.
That’s an improvement to the previous narrative. Baby steps… https://t.co/4F95yEbnp5
— CZ 🔶 BNB (@cz_binance) February 15, 2025
The timing of Powell’s comments comes amid rising inflation in the United States. Recent economic data shows the Consumer Price Index reached 3% in January, while the Producer Price Index hit 3.5% – its highest level since February 2023.
Powell’s Bitcoin Pivot
These inflation figures have created new challenges for both traditional financial markets and cryptocurrency investors. The Federal Reserve’s response to these inflation pressures has been to maintain tight monetary policy.
During his February 11th testimony, Powell made it clear that the Federal Reserve would not return to Quantitative Easing unless faced with extreme circumstances. He specified that such measures would only be considered if interest rates approached zero.
The Fed’s commitment to Quantitative Tightening has impacted market expectations for Bitcoin’s price movement. Many cryptocurrency investors had anticipated a more accommodative monetary policy, which historically has supported asset prices.
Powell’s stance on monetary policy reflects the Fed’s ongoing efforts to control inflation. The central bank has shown no immediate plans to cut interest rates, maintaining its restrictive policy position.
The cryptocurrency market has shown resilience despite these challenging monetary conditions. Recent price movements indicate that digital assets can maintain value even in a tight monetary environment.
Powell’s comparison of Bitcoin to gold represents an evolution in how central bankers view cryptocurrency. While still cautious, this perspective acknowledges Bitcoin’s potential role as a store of value.
The Federal Reserve’s current policy approach focuses on bringing inflation back to its 2% target. This goal continues to influence decisions about interest rates and monetary policy tools.
Bitcoin’s price movements have remained volatile throughout these developments. Market participants continue to watch for signs of how monetary policy might affect cryptocurrency valuations.
The broader crypto community has paid close attention to Powell’s statements, as Federal Reserve policies can impact digital asset markets. His views on Bitcoin’s relationship to gold have added new context to ongoing discussions about cryptocurrency’s role in the financial system.
The most recent data shows inflation remains above the Fed’s target rate, with Powell indicating the central bank will maintain its current policy stance until inflation shows sustained movement toward 2%.
