July 2, 2022
  • July 2, 2022
  • Home
  • Cryptocurrency
  • Bitcoin bulls have long claimed that cryptocurrency is a hedge against inflation. But recent price fluctuations have called this idea into question.

Bitcoin bulls have long claimed that cryptocurrency is a hedge against inflation. But recent price fluctuations have called this idea into question.

By on May 15, 2021 0

Fears of rising inflation came to a head on Wednesday when key data rose significantly above economists’ forecasts. Bitcoin, touted by some of its biggest supporters as a hedge against inflation – because it has limited supply, unlike the dollar – has not risen in response. Instead, it fell about 7% on the day.

Headline inflation data as measured by the Consumer Price Index rose 4.2% year-over-year in April, the fastest rate since 2008, while core inflation declined. rose 0.9% in the core index’s biggest monthly increase since 1982. The Dow Jones lost nearly 700 points on Wednesday.

Meanwhile, the alleged inflation hedge bitcoin fell below $ 50,000 to its lowest level in nearly three weeks.

The day inflation fears reached a boiling point would have been the time for Bitcoin to shine as the hedge against devalued and government-backed money that its supporters claim. With its fixed supply of 21 million bitcoins, the cryptocurrency is meant to protect itself against reckless central bank policies and helicopter money handed out by governments during the pandemic.

But as inflation fears developed in the weeks leading up to Wednesday’s crescendo, bitcoin was unable to break new records. It fell 24% last month, and Elon Musk’s tweet on his environmental impact following the impression of inflation did not help.

The world’s most popular cryptocurrency may not be the cover it claims to be, and its sensitivity to everything from local restrictions on bitcoin mining to Elon Musk’s latest tweets shows the coin. is truly treated by market participants as a risky asset and a vehicle for speculation.

Read more: 29-year-old cryptocurrency billionaire who perfected digital currency arbitrage shares 2 tips for investors looking to get into trading – and why ether is unlikely to surpass bitcoin

Still, some bulls are convinced that bitcoin will have its day in the sun as inflation rises.

Dan Held, head of growth for the Kraken cryptocurrency exchange, does not believe that recent bitcoin price movements indicate that it is not a good hedge against inflation, and said he had developed a floor at the current price of $ 45,000 to $ 50,000.

“I don’t think there was a single catalyst that would have pushed bitcoin up or down that was linked to inflation,” he told Insider. “Bitcoin rose so intensely earlier this year, it was sort of bitcoin catching its breath before another big milestone.”

Held said bitcoin is still undervalued as an inflation hedge, especially with a market cap of $ 1 trillion, it is much smaller than other assets traditionally considered to be inflation hedges like gold and real estate.