• The Federal Reserve Bank of New York recently concluded that Bitcoin hardly correlates to macroeconomic factors in comparison to other asset classes like precious metals, and the S&P 500.
• The report concluded that Bitcoin is unresponsive to both monetary and macroeconomic news and shares most of the features of a store of value such as gold.
• The report formulated a simple speculative asset model to determine the future probabilities related to Bitcoin value which indicated that monetary news negatively affects the value of the speculative asset through an interest-rate channel.
Federal Reserve Bank: Bitcoin Shares Most Features with Gold
The Federal Reserve Bank of New York recently conducted a study which concluded that Bitcoin hardly correlates to macroeconomic factors in comparison to other asset classes such as precious metals, and the S&P 500. According to their findings, it was determined Bitcoin is unresponsive to both monetary and macroeconomic news, and shares many features with a store of value such as gold.
Model for Determining Future Probabilities Related To Bitcoin Value
The report also formulated a simple speculative asset model in order to determine future probabilities related to its value. This model showed that changes in monetary policy have more effect on price than current target rates do. It also found an unexpected increase in US inflation could lead to higher input costs for exports which make a nation’s exports less competitive globally – resulting in increased volatility before and after FOMC statements regarding interest rates.
Bitcoin Price Unresponsive To Monetary And Macroeconomic News
The research suggested that Bitcoin is mainly unresponsive when it comes to monetary or macroeconomic news, meaning it does not react significantly when variables such as inflation or unemployment are changed or altered. This can be compared with traditional assets like gold or silver, who tend show reactions when these variables are adjusted by policymakers around the world.
Comparing Crypto Assets To Precious Metals Rather Than Dollars
Overall, this indicates crypto assets compare closely with precious metals rather than fiat currency – proving they cannot be used effectively as payment due their high volatility levels compared with traditional money systems. As Fed Chair Jerome Powell said back 2021, cryptocurrencies are too volatile for use at scale when it comes making purchases or payments for goods/services – reinforcing what this recent study has shown about price action in relation to macroeconomic news events.
In conclusion, this study once again highlights how much more closely crypto assets compare with gold rather than fiat currencies when it comes economic stability and usability within society at large – reinforcing why they cannot yet be adopted widely as payment systems until further development takes place within blockchain technology itself (for example through second layer solutions).