Crypto community Argues On Bitcoin Capacity As A Hedge Against Inflation

Crypto community Argues On Bitcoin Capacity As A Hedge Against Inflation

Image Credit: Pixabay

There is division in the Bitcoin community amid the massive spike in CPI (Consumer Price Index) in the United States. This division arose as the community argues whether BTC is now a hedge to inflation.

According to Business Insider, the CPI had its biggest one-month increase for over thirteen years. CPI is an indicator that calculates the average difference in price that consumers pay for every basketful of goods & services.

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The surge in inflation started in March, according to reports. First, the CPI increased by 2.6%, with a subsequent rise to 4.2% in April. The CPI finally clocked 5.4% in June.

Bitcoin Failed As An Inflation Hedge?

Bitcoin has reportedly failed in serving as an inflation hedge despite the new rise in the measured inflation of CPI. As a result, the BTC price has reduced to almost half of its former $64,000 value in the middle of April.

Some analysts report, ‘It is interesting that CPI inflation increased from + 1.4% to 5.4% in January and June. At the same time, Bitcoin within this period has been reducing to half.

Recently (@LizAnnSonders), Liz Ann Sonders quoted:

“Bitcoin no longer behaves as if it’s an inflation hedge. So itSo it will keep on having heavy expectations on higher yields.”

Moreover, Inflation is seen as transitory. It may be one of the reasons the CPI June report couldn’t break the sideways trading of Bitcoin – A senior equity analyst Ed Moyain stated.

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Reactions From Crypto Community

Subsequently, the crypto community opposed these observations on CPI-versus Bitcoin with advocates from other industries.

They emphasized that the profits they made earlier in their Bitcoin investment ‘are serving already as a hedge for some future. Furthermore, some BTC fans explained that Bitcoin had historically recorded a lot of growth, proposing many long-term gains.

Bitcoin is facing some significant set back as the price drops below $31k | Source: BTCUSD on TradingView.com

According to few crypto experts, Bitcoin is really “not the best hedge o For example, inflation.”

Mati Greenspan explained, there is no correlation between deflation or inflation data and the price action of Bitcoin. Mati is the founder of Quantum Economics, a firm that is into money management.

Obviously, BTC has always performed greatly over time. But the gains have mostly occurred when there is a global deflation and all risky assets.

Now that inflation is becoming a reality since the inception of BTC, crypto is seriously underperforming.

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The last argument triggered by CPI brings a new twist in a lasting debate about BTC becoming a hedging instrument.

Nassim Taleb and many other financial analysts have adopted the idea that inflation is not correlated with the price of BTC in any way.

Still, Paul Tudor Jones and some other global investors have joined BTC to preserve their investments against inflation.

Amid all these debates, market observers seem more concerned about the drop in BTC price given the upcoming increase in inflation.

Featured image from Pixabay, chart from TradingView.com
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