Bitcoin jumped 5% to over $10,300 — a five-month high — on Wednesday after Federal Reserve Chair Jerome Powell said the central bank was exploring a digital currency.
“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 emphasized 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 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.
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, Litecoin rose 6% to around $79, and bitcoin cash rose 6% to trade at $473.