3 Reasons Including Experts Why Bitcoin Is The Asset To Hedge Inflation!
3 Reasons Including Experts Why Bitcoin Is The Asset To Hedge Inflation!
High energy prices, reversal of the temporary VAT cut, material shortages: the inflation rate in the world is higher than it has been for decades!
Despite recent fears, Bitcoin is outperforming expectations as an inflation hedge. According to the latest weekly report from Arcane Research, BTC has increased the purchasing power of its holders by 520% since the beginning of 2020. This shows: The asset may have exceeded expectations as an inflation hedge.
Inflation in Europe increased in November to its highest level in almost 30 years. According to Germany’s Federal Statistical Office, consumer prices rose by an average of 5.2 percent compared to the same month last year. The authority thus confirmed an initial estimate. A higher inflation rate had previously been measured in June 1992, when it was 5.8 percent.
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Bitcoin as an inflation hedge
The U.S. Bureau of Labor Statistics recently released Consumer Price Index (CPI) data for November, showing that inflation in the U.S. rose to an annualized rate of 6.8%.
In case you don’t know what the Consumer Price Index (CPI) is, here’s a quote from the Bureau of Labor Statistics explaining it:
“The Consumer Price Index (CPI) is a measure of the average change in prices paid by urban consumers over time for a market basket of consumer goods and services.”
Since the bitcoin price has not improved since the release of the higher-than-expected CPI percentage, some have taken this as an opportunity to argue against the coin as an inflation hedge.
However, Arcane Research points out that the CPI measures inflation that has already occurred — and that the indicator is a lagging metric. So if BTC is truly an inflation hedge, inflation should already be factored into its price.
The chart below shows how BTC has performed compared to other inflation protection instruments since January 2020:
Performance of BTC since the beginning of 2020 | Source: The Arcane Research Weekly Update — Week 49
BTC return since 2020: 520%
The period since the beginning of 2020 has been characterized by high inflation. This is due to the many stimulus programs and supply chain issues. As you can see in the chart above, BTC has returned 520% during this period — much more than gold’s 8% return and the S&P 500’s 33% gains.
The report concludes that this remarkable performance of BTC over such a period can only mean that the cryptocurrency is indeed an excellent inflation hedge.
At the time of writing, the bitcoin price is hovering around $46,800. This represents a 2% decline over the last seven days. The cryptocurrency has lost 22% of its value in the previous thirty days.
The following chart shows the development of the BTC price over the last few days.
Since the crash, the bitcoin price has moved chiefly sideways and has not shown any signs of recovery so far. At the moment, it is unclear when the cost of the coin will break out of this narrow trading range — and in which direction it could break out.
It is essential not to put the money you have saved into just one cryptocurrency. Of course, BTC should be a big part of it, but diversification is just as important.
FAT PIG SIGNALS offers you a portfolio builder every two weeks for coin opportunities. This portfolio builder is based on two weekly purchases in the crypto market to benefit from dollar-cost-averaging. Every two weeks, they analyze which coins might outperform bitcoin more and thereby adjusts the percentages of crypto purchases of the coins on a bi-weekly basis. New projects will be added, and those currently not performing well will be temporarily removed