Bitcoin as an Inflation Hedge?

If you were watching the charts this morning, you probably noticed a 2% surge in Bitcoin (BTC), in the minutes following today’s Department of Labor Consumer Price Index announcement.

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Within a few hours, Bitcoin was trading around $50,000. In the hours following, the coin slid to below $48,000, with a price of $47,879 at time of writing.

The Department of Labor study showed the CPI up 6.8%, over a 12-month span, the largest since June 1982.

12 month CPI

(Source: Bureau of Labor Statistics )

And that’s exactly what happened a month ago.

When the November CPI numbers came in 0.9% above October’s figure, Bitcoin surged over $3,000, to a new high of $68,990. Later in the day, as money markets began to trust that the Fed would suck liquidity out of the financial system to curb inflation – – prices plummeted to $63,000.

What’s the deal?

Seen by many as an inflation hedge, Bitcoin has been dubbed “digital gold” and “gold 2.0”, suggesting it could be a digital counterpart to the precious metal. It is widely argued that because Bitcoin is meant to have a finite quantity, it is impossible for a government or central bank to dilute its value.

Veteran hedge fund manager Paul Tudor Jones said in the past that he likes Bitcoin as a store of wealth.

So, why isn’t it increasing in value as inflation reaches record highs?

Bloomberg Economists have estimated half of Bitcoin’s most recent returns are described as a response to fears of inflation.

And that’s bearing in mind that Bitcoin was only created in 2009.

With hedge fund managers and financial analysts turning to crypto – anyone would have to admit that if the Bitcoin trend continues, its price will eventually stabilize and it could yet become an inflationary hedge.

Enjoy the weekend…

And carpe crypto,

Matt Insley
Editor Daily Crypto Hunter

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Matt Insley

Matt Insley has been Agora Financial’s resident resource hunter for years, traveling the country finding the best hard asset plays for you. Now he brings that "muddy boots" experience as co-author of Outstanding Investments.

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