Federal Reserve Releases Report on Bitcoin’s Store of Value Status and Impact of Macro News on Price
By The Federal Reserve Bank of New York has released a new report which stated that Bitcoin shares most of the features of a store of value, such as gold.[0] The report, titled “The Bitcoin-Macro Disconnect”, analyzed the reaction of Bitcoin’s price over 30-minute and 1-hour intervals in comparison to leading fiat currencies such as the Japanese Yen (JPY), Euro (EUR), US Dollar (USD), and British Pound (GBP) during significant macroeconomic news events.[1]
The key result of the report is that Bitcoin is orthogonal to all macro news that was considered, except for Consumer Price Index (CPI).[2] This is in stark contrast with the other assets that were used for comparison, such as gold, silver, S&P 500, and various bilateral exchange rates, which all responded to macroeconomic news with an economically large and significant coefficient.[3]
The speculative probability model showed that news regarding the future path of policy has a greater impact on Bitcoin prices than news regarding the current target rate.[2] According to the report, Bitcoin price reacted with increased volatility before and after the Federal Open Market Committee (FOMC) statements that touched on the country’s interest rates.[3]
The U.S. Federal Reserve has continued to raise interest rates, and this has been a cause of concern for many in the crypto space. Brian Armstrong, CEO of Coinbase, posted on Twitter on Wednesday that there have been rumors that the SEC plans to disallow regular investors from taking part in crypto staking, a lucrative tactic utilized to operate blockchains such as Ethereum.[4]
The total value of all cryptocurrencies currently stands at $1.085 trillion, with Bitcoin accounting for 41.3% of the market.[5] Ethereum is up 0.50% in the last 24 hours and is currently trading at $1,636.[6]
Most instances of a golden cross have resulted in favourable returns for bitcoin, and many have occurred at critical long-term inflection points, according to Fundstrat Global Advisors' digital-asset strategy head Sean Farrell.[7]
Crypto exchanges like Coinbase and Kraken have started offering the staking facility to diversify revenues, and the SEC developments had consequences across crypto-linked assets.[8] Coinbase Global Inc. experienced a 14% decline in its stock, the biggest fall in over six months, due to worries that its staking products could be in danger.[8]
0. “Fed Report Puts Bitcoin Alongside Gold As ‘Store Of Value'” Benzinga, 9 Feb. 2023, https://www.benzinga.com/markets/cryptocurrency/23/02/30827310/fed-report-says-bitcoin-akin-to-gold-as-store-of-value-even-as-staking-ban-rumors-sap-sent
1. “New York Fed says Bitcoin shares most features of ‘a store of value’” CryptoSlate, 9 Feb. 2023, https://cryptoslate.com/new-york-fed-says-bitcoin-shares-most-features-of-a-store-of-value
2. “Bitcoin price more correlated to FTX developments than macro events: Research” Cointelegraph, 10 Feb. 2023, https://cointelegraph.com/news/bitcoin-price-more-correlated-to-ftx-developments-than-macro-events-research
3. “Federal Reserve Bank: ‘Bitcoin shares most of the features of a store of value such as gold' – Report” Crypto News Flash, 9 Feb. 2023, https://www.crypto-news-flash.com/federal-reserve-bank-bitcoin-shares-most-of-the-features-of-a-store-of-value-such-as-gold-report/
4. “Bitcoin's 2023 rally fizzles amid SEC's crypto crackdown – Cryptopolitan” Cryptopolitan, 10 Feb. 2023, https://www.cryptopolitan.com/bitcoin-2023-rally-fizzles-amid-crackdown/
5. “Cryptos Slide As Jobs Data Dashes Hopes Of A Quick Fed Pivot” RTTNews, 6 Feb. 2023, https://www.rttnews.com/3342054/cryptos-slide-as-jobs-data-dashes-hopes-of-a-quick-fed-pivot.aspx
6. “Bitcoin, Ethereum, Dogecoin Soar On Hopes Of Fed Dovishness” Benzinga, 8 Feb. 2023, https://www.benzinga.com/markets/cryptocurrency/23/02/30790893/bitcoin-ethereum-dogecoin-soar-on-hopes-of-fed-dovishness-analyst-says-30k-is-still-a-magn
7. “Bitcoin flirts with ‘golden cross' – TechCentral” TechCentral, 6 Feb. 2023, https://techcentral.co.za/bitcoin-flirts-with-golden-cross/221766/
8. “Bitcoin's 2023 bounce is fizzling as SEC turns up heat on crypto” Moneyweb, 10 Feb. 2023, https://www.moneyweb.co.za/moneyweb-crypto/bitcoin/bitcoins-2023-bounce-is-fizzling-as-sec-turns-up-heat-on-crypto
