As Bitcoin destroyed the $12,000 level earlier today, many pundits and analysts looked for answers for why. The solution may not be in anything about the cryptocurrency, but more about the newest nominee to the Federal Reserve (Fed), Marvin Goodfriend.
Goodfriend has been hailed both as a visionary and as the ‘worst Fed nominee of all time,’ depending on which news source is reporting. However, the newest potential Fed member may be having a positive impact on the Bitcoin market. His anti-cash views have been criticized as a form of monetary strangulation and government control into personal finance like nothing the US has seen to date.
Below zero
The appointee has previously voiced his opinion that paper money keeps financial freedom in the hands of the individual – a scenario he does not like should a crisis occur. During a crisis, the Fed generally lowers the interest rates to increase borrowing power for consumers and businesses alike.
The problem is that should the Fed desire to lower interest rates to something under zero on savings or checking accounts individuals could simply withdraw paper money from their accounts to keep from losing money. This freedom to protect the value of money does not sit well with Goodfriend, who posits that cash thereby limits the power of the Fed to control the economy.
This sort of stringent monetary policy may well be the cause of the recent spike in Bitcoin. Should such strong-handed government policies come to fruition, a digital, decentralized currency presents a method for trading and interaction that is outside of Federal Reserve control.
Certainly other factors have contributed to the price bump, but Goodfriend may end up being a friend to Bitcoin, inadvertently.