Benzinga - Jerome Powell's recent comments on cryptocurrency have caused a stir, with the Federal Reserve Chair suggesting they could become worthless if the U.S. introduces its own central bank digital currency. How true is this? Let’s break it down.
The main thesis in favor of this affirmation is that CBDCs may reduce the need for Bitcoin (CRYPTO: BTC) and push its price down. If people start adopting CBDCs, it could create competition between Bitcoin and state-sponsored currencies. Additionally, CBDCs could offer greater stability and predictability than Bitcoin's volatile nature.
Of course, anyone who understands the magnitude of Bitcoin would know that this is not the case at all. In fact, CBDCs are going to be what ultimately makes BTC visit the moon.
But why? The first immediate consequence of creating a retail CBDC would be a significant increase in liquidity in the digital market, which would immediately add billions of dollars to the crypto market, thus eliminating even more barriers and increasing adoption.
As CBDCs become more prevalent, they could be traded on exchanges, increasing liquidity and stability. Exchanges such as Binance (CRYPTO: BNB) or Coinbase (NASDAQ: COIN) could list these institutional tokens, generating a significant increase in traded volume.
See Also: Fed's Powell Proposed Wholesale CBDC Implementation Could Bypass Congress
Moreover, CBDCs are inherently tied to government control. China, Iran, the United States and Latin America are all creating their own regional digital currencies and programming them according to their laws and customs. This multipolar situation in which the world is heading will only further position Bitcoin as a symbol of freedom and the backbone of the international digital economy, taking the place of neutrality that Switzerland has occupied in previous times.
Ultimately, if CBDCs are implemented, they would incentivize the adoption of digital currencies, provide the market with unlimited liquidity, add even more utility to Bitcoin, and solidify its position as the central hub of the international economy.
See Also: US Economy Needs More Tightening For Fed To Meet Goal: Morgan Stanley
Disclaimer: The author has BTC exposure in his portfolio.
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