Bitcoin[1], after facing a rather dramatic week, registered a quick comeback on the charts and was trading at $65,909, at press time. Over the past year, the crypto has recorded 311.43% ROI v. USD for its HODLers. In fact, despite the price consolidation, bearish months, and many FUDs, BTC’s narrative as an inflation hedge[2] seems to be only growing.
Bitcoin – An inflation hedge?
So, is Bitcoin the inflation hedge that could save the day? Well, this question seems more relevant now than ever. The reason? The U.S government’s announcement that its consumer price index has soared by 6.2% from a year ago – The biggest 12-month jump since 1990.
Soon after the announcement, stock futures dropped while bond yields increased sharply. On the other hand, Gold, which has held the ‘inflation hedge’ badge for a long time, also increased. Interestingly Bitcoin followed suit, at least for the time being.
Source: IntoTheBlock[3]
In fact, amid the news of rising inflation, BTC’s price saw a new all-time high of over $69,000 on 10 November. In addition to that, a Bloomberg report[4] found out that Bitcoin has achieved 99.996% deflation over the past 10 years. Notably, the price of one Bitcoin in 2011 can now buy just 0.004% of a Bitcoin today. Meanwhile, the CPI has risen by 28% in dollars over the same timeframe.
So, while economists estimate that roughly half of Bitcoin’s price surge over the last few months has been driven by inflation fears and another half due to momentum trading, how much truth does the same hold?
Still lacks value
Looking deeper into capital markets, it can be observed that Bitcoin has, in fact, been increasingly correlated with inflation expectations.
Source: IntoTheBlock[5]
ProShares’ inflation expectations ETF
