Bitcoin Fed Report
A recent analysis on Bitcoin’s performance and its relationship to conventional precious metals like gold was released by the Federal Reserve Bank of New York. The influence of intraday changes in money market forward rates on the price of Bitcoin was examined in the 31-page study by the researchers using a technique known as principal components analysis.
with respect to precious metals
The study finds that Bitcoin acts very much like a precious metal, but it also issues a warning that the US dollar cannot be replaced by it owing to Bitcoin’s high level of volatility. The writers, Gianluca Benigno and Carlo Rosa, reaffirm that Bitcoin is a speculative asset that is not frequently utilized as a form of payment, in line with Fed Chair Jerome Powell.
The Sensitivity of Bitcoin to Macroeconomic Conditions
The researchers are surprised by the report’s finding that Bitcoin is unaffected by monetary or macroeconomic news. The study analyzed how the price of Bitcoin changed in response to major macroeconomic events to those of the Japanese Yen, Euro, US Dollar, and British Pound.
To comprehend the mismatch between Bitcoin and macroeconomic issues, the Fed accepts the need for more study. According to the research, “the finding that Bitcoin does not respond to monetary news is intriguing since it raises some concerns about the significance of discount rates in pricing Bitcoin.”
Conclusion
The Fed report’s conclusion underscores the distinctive qualities of Bitcoin as a speculative asset and the limitations of its capacity to replace conventional currencies because of its volatility. The paper also highlights concerns about how discount rates are used to determine Bitcoin’s price, which need to be looked at further.