- The sharpest rise in CPI inflation in three decades has pushed investors closer to Bitcoin.
- Institutional inflows in Bitcoin have remained at a record high recently as investors prefer BTC over Gold.
The inflation fears among retail players are getting real and could last a little longer as acknowledged by the Fed and the U.S.government. To protect their money, retailers have started showing more trust in the world’s largest cryptocurrency Bitcoin (BTC) as the best inflation hedge.
In fact, many investors also find Bitcoin to be a better inflation hedge over the precious metal Gold. A recent Bloomberg analysis puts light on how Bitcoin has managed to beat inflation consistently over the last decade. In the latest article, Bloomberg author John Authers notes that Bitcoin has successfully managed to achieve 99.9 percent deflation over the last decade.
What cost an entire 1 BTC back in 2011 now just costs 0.004 percent of a Bitcoin as of date. During the same time period, the Consumer Price Index (CPI) has surged 28 percent in U.S. Dollars. Bloomberg analysts note that nearly half of the Bitcoin price surge comes against the backdrop of inflation fears. In the article, economists Björn van Roye and Tom Orlik note:
Our model shows that for Bitcoin, the importance of inflation and hedging against uncertainty become more important drivers over time, accounting for 50% of price moves in the latest cycle relative to 20% in 2017.
Earlier this month, the Bitcoin (BTC) price touched an all-time high above $69,000 just on the day the U.S. released its October CPI inflation number. For the month of October, CPI surged a staggering 6.2 percent across the country. This was the fastest ever surge since the 1990s. Furthermore, if we use the 1980s CPI measurement standards, it stands close to a staggering 15 percent.
Bitcoin emerging as a strong inflation hedge
The world’s largest cryptocurrency Bitcoin (BTC) is emerging as a strong inflation hedge and more powerful than Gold. Last month a JPMorgan report noted that institutional players have been moving money from Gold to Bitcoin.
“Institutional investors appear to be returning to bitcoin perhaps seeing it as a better inflation hedge than gold,” said JPMorgan. As a testament to this, the institutional inflow in Bitcoin also stood at record high levels of $8.8 billion.
On the other hand, several U.S. politicians and lawmakers have started showing affinity to Bitcoin. Earlier this month, Miami city mayor Francis Suarez announced to accept his next paycheck 100 percent in Bitcoin. Other pro-Bitcoin leaders soon joined the bandwagon, Ney York City’s incoming mayor Eric Adams has announced the next three paychecks in Bitcoins along with additional crypto-friendly measures.
Analysts are already expecting Bitcoin price targets in the range of $100,000-$250,000 over the next few months. On Monday, the Bitcoin blockchain underwent one of the most important Taproot upgrades bringing smart contracts functionality to the Bitcoin network with better scalability.