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The bitcoin price has topped $70,000 per bitcoin, up from lows of $15,000 at the end of 2022, with “leaks” this week sparking wild speculation of a Wall Street price game-changer.
Now, as the market braces for a huge Federal Reserve inflation flip, Fed president Neel Kashkari has issued an “incredible” response when asked, “when will the Fed put bitcoin on its balance sheet?”
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Federal Reserve president Neel Kashkari was asked when will the Fed put bitcoin on its balance sheet … [+]
“You already said on record that you have an unlimited supply of dollars, doesn’t it make sense to trade some of them in for a currency with a hard cap,” Jennifer Ablan, editor in chief of Pensions & Investments, asked Kashkari during a LinkedIn Live event on behalf of an audience member and referring to bitcoin’s fixed supply of a 21 million bitcoin.
“What is that hard cap,” Kashkari, the president of the Federal Reserve Bank of Minneapolis, responded. “The hard cap could be zero for bitcoin, it could go down to zero. Just replace the word bitcoin with Beanie Babies. Should the Fed buy Beanie Babies, because Beanie Babies were a fad for a while?”
For bitcoin’s “hard cap” of 21 million to be changed it would require a majority of bitcoin miners, who maintain the network in exchange for bitcoin, to vote for a change. This would “fork” the network, with the minority of miners continuing to maintain the bitcoin with a 21 million hard cap.
Kashkari said that like Beanie Babies, bitcoin has “no actual utility in the economy, other than being a nice toy that some people enjoy owning and trading,” adding the only use for bitcoin is “trying to subvert banking regulations, get around either marijuana banking or illicit activities.”
Bitcoin “has been around for more than a decade, and more than a decade later, there’s still no legitimate use case in an advanced democracy,” Kashkari said, warning, “there’s a lot of fraud, hype and confusion so I am worried from a consumer perspective.”
Kashkari’s comments were described as “incredible” by Human Rights Foundation’s chief strategy officer Alex Gladstein, who said the clip would be “studied by future historians.”
“The last two words are interesting,” Gladstein posted to X. “Does that mean he thinks there’s a use case in a flawed democracy or a dictatorship? Maybe we are getting somewhere.”
Bitcoin has found demand in countries suffering from hyper inflation in recent years, such as Turkey and Venezuela.
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The bitcoin price has bounced back from its 2022 price crash, topping $70,000 per bitcoin.
Gladstein added that there are “dozens of legitimate use cases for bitcoin in an advanced democracy ranging from power grid management to sending money abroad to saving for your family’s future to micro payments to multi-sig treasury management to turning waste energy into profit to reducing methane emissions to building a surveillance-resistant digital commerce experience to donating to charity.”
Kashkari, who is among the more hawkish of the Federal Reserve’s interest rate-setting Federal Open Market Committee (FOMC), went on to warn the Fed might not cut interest rates at all this year if inflation fails to fall further.
“If we continue to see inflation moving sideways, then that would make me question whether we [need] to do those rate cuts at all,” Kashkari said.
The bitcoin price rally over the last few months has been partly put down to market expectations the Fed will soon have to cut rates from their post-2008 crisis high as the U.S. grapples with its spiraling debt pile.
Last month, Michael Novogratz, the chief executive of bitcoin and crypto financial services company Galaxy Digital, predicted the bitcoin price and wider crypto market will benefit from the gargantuan U.S. debt.
“There’s one number I think that you should keep on your refrigerators, $34 trillion of debt, and in 100 days, it’ll be $35 trillion, and in 200 days, it’ll be $36 trillion, and until the United States, and other countries, get their finances in order, the story for bitcoin and other digital assets is going to continue to grow,” Novogratz said during the company’s recent earnings call. “The [bitcoin] story is powerful right now.”
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