Investors in bitcoins and other cryptocurrencies have enjoyed an unusual run, but now they are concerned that Janet Yellen’s arrival as US Treasury Secretary has provoked animosity from regulators and central banks. A new era may begin, with booster calling digital money “free.”
In her last press conference as chair of the Federal Reserve in 2017, Ms. Yellen said the bitcoin was a “highly speculative asset” and “not a stable store of value.” The dismissal was echoed by many other government officials at the time. However, since then, the market value of the bitcoin has almost doubled in value. Digital currencies are here to stay.
In the first crypto frenzy of 2017-18, comedian John Oliver described Bitcoin as “everything you don’t understand about computers, you don’t understand about money”. Aspects of technology, especially the blockchain network of digital ledgers used to record transactions, did not really survive the initial hype, but they are evolving. The bn 20bn launch of the “initial coin offer” seems to contain elements of a speculative bubble, but the funds raised are now needed to launch large projects like other IT projects in Silicon Valley. Being used.
Jay Clayton’s recent departure from the chair of the U.S. Securities and Exchange Commission could lead to a less hostile regulatory scrutiny of these activities, especially if he is replaced by Gary Jensner, who teaches digital currencies.
However, payment and transfer vehicles remain resistant to digital currencies. Due to the high transaction costs in part, the bitcoin is not used for large-scale payments, and its future role seems limited.
Outgoing Treasury Secretary Steven Manuchehr is working on new regulations to increase transparency in bitcoin transfers and reduce the scope for money laundering. Ms. Yellen, in conjunction with the Fed, will adopt an even more conservative approach, making the payment system a public good.
The Fed is cooperating with its foreign counterparts in investigating the development of digital currencies. It is almost certain that CBDCs will eventually be released into the larger realm after China’s lead. However, they will be kept in national currencies, not in cryptocurrencies.
Private competitors will be heavily controlled or discouraged in real new currencies, such as bitcoins. Hybrid stabilized coins, such as Facebook’s library, attached to a single currency, or other real assets could be welcomed by central banks if they were to be transferred directly to traditional currencies. Moreover, they do not have power through blockchain. Each central bank can develop its own distributed ledger technology.
It still leaves a role for the corrupt as an investment vehicle and a store of value. Can Bitcoin Seriously Compete for Gold as a Safe Asset for Largest Investors? History, rules and market fluctuations may seem impossible, but it has begun to play another important role.
Many large hedge funds and some traditional asset managers have followed Paul Tudor Jones in accepting bitcoin as a core hedge against inflation.
While this may sound appealing when the central bank was making money by buying government loans last year, there are some signs of inflation on the horizon.
Yet bitcoin prices continue to rise, apparently driven by a myth that a privately created asset, which in theory is a limited supply, looks like “inherited” fighting currencies. Cannot “print”.
According to the Gold Hub, at the end of 2019, there were 198,000 tons of gold deposits above ground, of which about 57,000 tons were proven underground. The total stock price today will be about 17 tons. The latest market value of the bitcoin is approximately .6 0.6tn – bitcoin bulls look at its value as a way to see how far it can go.
There seems to be no less reason on the basis of monetary policy or financial stability as regulators should be concerned about cryptocurrencies competing for gold as a price reserve.
The crypto world is currently obsessed with short-term speculation. However, if investors continue to buy the dubious statement that these private currencies are “safe” from the control of the central banks, they may increase the market value significantly in the coming years.
Foreign things have definitely happened in the financial markets.
Financial Times Limited 2021