Fed Finds Bitcoin Shares Most Features of ‚Store of Value‘
• The Federal Reserve Bank of New York published a report showing that Bitcoin is similar to gold, but unable to replace the US dollar due to its volatility.
• The researchers examined the price of Bitcoin around intraday changes in money market forward rates in thirty-minute and one-hour intervals before and after scheduled FOMC announcements.
• The report concluded that Bitcoin is orthogonal to all macro news except for CPI.
New York Fed’s Report on Bitcoin
The Federal Reserve Bank of New York recently released a report called „The Bitcoin-Macros Disconnect“ which compares Bitcoin to gold. In the 31-page report, it was stated that Bitcoin performs more kin to a precious metal like gold, but warned that it can never replace the US dollar due to volatility.
Using a quantitative methodology known as principal components analysis, the researchers examined the price of Bitcoin around intraday changes in money market forward rates in thirty-minute and one-hour intervals before and after scheduled FOMC announcements.
Fed Chair’s Opinion
This new report builds on statements made by Fed Chair Jerome Powell who asserted back in 2021 that: „Crypto assets are highly volatile […] They’re more of an asset for speculation, so they’re not particularly in use as a means of payment. It’s more of a speculative asset. It’s essentially a substitute for gold rather than for the dollar.“
The main conclusion from this study is that Bitcoin is orthogonal to all macro news that was considered except CPI. This stands in stark contrast with other traditional assets such as gold, silver, S&P 500, and various bilateral exchange rates which respond strongly to macroeconomic news.