Business Insider Edition

Bitcoin rockets past $10,000 after the Fed says it's 'taking a deep look' at a government cryptocurrency

Theron Mohamed , Business Insider US
 Feb 12, 2020, 03:06 PM
WASHINGTON, DC - FEBRUARY 11: Federal Reserve Boa
Federal Reserve Board Chairman Jerome Powell testifies during a hearing before House Financial Services Committee February 11, 2020 on Capitol Hill in Washington, DC. The committee held a hearing on Monetary Policy and the State of the Economy. (Photo by Alex Wong/Getty Images)
  • Bitcoin surged past $10,000 (about R147,000) on Wednesday after Fed Chair Jerome Powell said the central bank was exploring a government cryptocurrency.
  • "Every major central bank is currently taking a deep look," Powell said on Tuesday, although he emphasised the value of the US dollar.
  • Bitcoin jumped 5% to a five-month high as Wuhan coronavirus fears boosted demand.
  • The "halving" event in May will also halve bitcoin payouts to miners.
  • For more stories go to www.BusinessInsider.co.za.

Bitcoin jumped 5% to over $10,300 (R152,000) - a five-month high - on Wednesday after Federal Reserve Chair Jerome Powell said the central bank was exploring a government cryptocurrency.

"Every major central bank is currently taking a deep look," Powell said at a Congressional hearing on Tuesday. "We feel that's our obligation, technology has now made that possible. I think it's very much incumbent on us and other central banks to understand the costs and benefits and tradeoffs associated with a possible digital currency."

"It looks like the US authorities are finally taking bitcoin and its peers seriously," Simon Peters, an eToro crypto analyst, said in a morning note.

However, Powell emphasised that having the US dollar "at the heart of the financial system is something that has served us well."

Rising demand and an upcoming supply cut

Bitcoin jumped to north of $10,400 (R153,000) at one point on Wednesday - a 44% increase from the start of this year - as it benefited from higher demand and a looming supply cut.

A growing number of investors are plowing cash into cryptocurrencies as Wuhan coronavirus threatens conventional assets. The flu-like illness has infected more than 45 000 people, killed at least 1 100, and spread to upwards of 20 countries including the US, Britain, India, and Australia. It has also disrupted Chinese manufacturing and commerce, forced companies such as Apple and Starbucks to temporarily shut some of their locations in the region, and threatens to stymie the world's second-largest economy this year.

Speculators are also buying bitcoin ahead of the "halving" event, which will halve the number of bitcoins rewarded to miners.

"Bitcoin started rising during the market sell-off triggered by coronavirus," Gavin Smith, CEO of cryptocurrency group Panxora, said in an email. "The underlying driver is the bitcoin halving event in May."

"Previous halving events have seen some of the larger participants hold off on releasing bitcoin into the market in anticipation of a rise into the event," he continued. "We believe this same dynamic is currently in play."

Other cryptocurrencies followed bitcoin's lead on Wednesday. Ethereum surged 15% to about $255 (R3 700), Litecoin rose 6% to around $79 (R1 100), and bitcoin cash rose 6% to trade at $473 (R6 900).

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