Bitcoin surged to a fresh all-time high of $56,425 earlier today and its market cap crossed $1 trillion for the first time in history. Despite the market-leading cryptocurrency’s strong rally, the Federal Reserve Bank of Boston remains unimpressed with the digital asset.
Federal Reserve Bank of Boston’s President Eric Rosengren said that he has been personally surprised that Bitcoin has continued to flourish.
In an interview with the New York Times, Rosengren said,
“I would expect, over time, Bitcoin prices to come under pressure.”
According to him, there is no long-lived use case for digital currencies like Bitcoin in a world where central banks will eventually offer their own alternatives. Rosengren pointed out,
“I would suspect, down the road, that a number of central banks will have digital currency,” he added “When there is a digital currency available, other than the underground economy, it’s not clear why people would use Bitcoin.”
He also noted that China and Sweden are well on their way to implementing their own central bank digital currency (CBDC), commenting that the United States was not far behind in the process.
According to him, the Boston Fed has been actively researching the possibility of introducing a CBDC in the U.S.
Most investors making allocations towards Bitcoin are not doing so to transact via digital currency, but to invest in an alternative ‘store of value’. Bitcoin is often compared to gold as an appropriate inflation hedging asset during periods of high inflation.
Tesla CEO Elon Musk even commented on Tesla’s recent $1.5 billion Bitcoin purchase saying that the reasoning behind this purchase wasn’t directly reflective of his opinion”.“When a fiat currency has negative real interest, only a fool wouldn’t look elsewhere”, he stated on Twitter.
According to Musk, having some Bitcoin is simply a “less dumb” form of liquidity than cash.