• The Federal Reserve Bank of New York concluded that Bitcoin is unresponsive to both monetary and macroeconomic news.
• Bitcoin shares many features with a store of value such as gold rather than the US dollar.
• The study established that monetary news about the future path of policy has larger effects on Bitcoin price than those about the current target rate.
Federal Reserve Bank Concludes Bitcoin Shares Features with Gold
The Federal Reserve Bank of New York recently conducted a study which concluded that Bitcoin is unresponsive to both monetary and macroeconomic news. Compared to other asset classes such as precious metals and S&P 500, Bitcoin does not correlate to macroeconomic factors. Additionally, due to its high volatility, it cannot be used as a form of payment at scale. As such, Bitcoin and other crypto assets compare more closely with Gold and other precious metals rather than the United States dollar.
Speculative Asset Model Establishes Monetary News Effects on Bitcoin Price
The report formulated a simple speculative asset model to determine the future probabilities related to Bitcoin value. According to this probability model, several hypotheses were derived including that monetary news negatively affects the value of the speculative asset through an interest-rate channel. Additionally, it was established that monetary news about the future path of policy has larger effects on Bitcoin price than those about the current target rate. For instance, an unexpected increase in US inflation may lead to higher input costs for exports, making them less competitive in global markets and leading to changes in Bitcoin price action before or after FOMC statements touching on interest rates.
Bitcoin Reacts Differently from Traditional Assets
The main result from the Fed’s report is that compared with traditional assets like gold or silver, or various bilateral exchange rates like S&P 500 index fund prices – all of which respond significantly to macroeconomic news – BTC remains largely orthogonal (unresponsive) except for Consumer Price Index (CPI). This means that BTC does not respond similarly nor predictably when compared with traditional financial systems and investments in reaction to external economic stimuli or shocks like changes in GDP or inflation levels etc., thus providing an alternative investment opportunity when diversifying one’s portfolio away from traditional investments into digital assets .
Bitcoin Not Yet Ready To Be Used As Payment Method At Scale
Despite its potential as an attractive alternative asset class for portfolio diversification purposes due its uncorrelation from traditional markets – just yet due its high volatility, BTC is still too unpredictable for use as a form of payment at scale according to Jerome Powell back in 2021 who stated “crypto assets are too volatile” for this purpose currently..
In conclusion then, while BTC has great potential as an alternative asset class offering investors greater portfolio diversification benefits by virtue of its uncorrelated nature versus traditional assets – it is still too volatile currently for any large scale usage as a form of payment method at present time