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Ben Bernanke, a former chair of the US Federal Reserve, has said that cryptocurrencies, including Bitcoin, cannot be used as an alternative to fiat. Bernanke said that the only use case for Bitcoin was as a speculative asset or for criminal activities.
Former Fed chair dismisses Bitcoin
Bernanke said that the prices of cryptocurrencies were very volatile, which limited their use case as a medium of exchange or even a store of value. He said that while the assets successfully served speculative purposes, they could not be used as substitutes for fiat currency.
“If Bitcoin were a substitute for fiat money, you could use it to go buy your groceries. Nobody buys groceries with Bitcoin because it’s too expensive and too inconvenient to do that,” Bernanke said.
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The official also said that the price of groceries changed according to Bitcoin’s price, which hindered the use of the asset as a medium of exchange. Cryptocurrencies are volatile, and currently, Bitcoin’s price is trading at over 50% below its all-time high.
Bernanke also argued that Bitcoin had a strong use case in illegal activities. Cryptocurrencies have been linked to illicit activities, but data from Chainalysis on-chain data has refuted this, showing that Bitcoin accounted for a very small fraction of illegal activities. Cash remained the top option for criminal deals.
The former Fed chair has also dismissed arguments that Bitcoin could have a use case as a store of value. “Gold has an underlying use value – you use it to fill cavities. The underlying use-value of Bitcoin is to do ransomware or something like that,” he argued.
Bernanke talks about inflation
Inflation in the US has been soaring over the past year, and it is currently at a 40-year high. However, Bernanke argued that as global supply chains continued to recover, inflation would drop without any intervention from the Federal Reserve. If the Federal Reserve tightens the interest rates, it could trigger a countrywide recession.
The Federal Reserve recently increased the interest rates by 50 basis points, which affected the stock markets and the crypto markets that erased all the gains made in 2021. Bitcoin is still trying to recover past $30,000. Bernanke also said that inflation expectations should be monitored because if they increase, it could show that the market is losing confidence in the credibility of the Federal Reserve.
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