Bitcoin Forum

ㅤ

The cryptomarket is supposed to grow against the inflation due to its limited supply, but here the market is experiencing the downturn as the inflated currencies. The inflation keeps rising and it has come out big all of the sudden as people have started to move after a long term work from home. During those time period the food price rise didn't make a big impact. By the time the transportation too is limited and now everything is getting to be normal and the impact is getting high. It is a slow process to get solved. More countries will join the queue soon.

I thought Bitcoin is the greatest hedge against inflation ever? The last year's bull run happened because companies declared that they will buy BTC to protect themselves against inflation. So why isn't Bitcoin growing now?

My theory is that Bitcoin simply moves in speculative cycles - when a critical mass of investors buy, it creates hype and the price gains momentum and grows incredibly fast, then when the market runs out of new buyers, the process reverses and we have a bear market. The news don't really matter, they can be interpreted to fit either scenario. If Bitcoin goes up while there's inflation and turmoil in the world, people say that Bitcoin is a hedge and a reserve asset. If it goes down while those thing happen, people say that Bitcoin is a risk asset and it's normal for it to be also bearish.

The quote above is a snippet from the news, who believes this? I think they are trying to deny the obvious, that the printing of huge amounts of money and all of the policies for covid-19 control and aid is the major cause of this extremely high inflation level, it is obviously not the only cause, but it has a major role to play. It was predicted to happen, concerns were raised when the government kept on printing money, but from the situation now, they were anything but ready for the consequences in inflation.
Why do you think this news is directly the cause of the dump in bitcoin. Bitcoin has been down for many weeks now, and has been moving around the $29,000 mark to slightly above $30,000.

I hope the best for the people, the common working people of the United States.

As a Venezuelan, I can asure the inflation is not to be understimated, it can cause permanent pain and losses to the working class families of any society. I do not live in the United States, but I have seen some news on internet suggesting that politicians may not be taking this subject with the seriousness one should expect from them.
Could please someone from USA corfirm or deny that for me?
_______________________________________________________________________________ _____________
Also, I will leave here a typical graph that shows how inflation have been hehaving here during the recent years, for the sake of context.


Source: https://sites.krieger.jhu.edu/iae/research-programs/special-topics-venezuela/
_______________________________________________________________________________ ______________

If it is actually true that US government is not taking care of this in a proper way, I'd suggest you to cut your unnecesary expenses as much as possible and be wary in case some foreshadowing red flags appear, perphaps even move onto cheap vegetal protein-rich food, to save money...

Yeah when those CPI numbers came out and shortly ETH started to dump, I knew today was going to be the day it broke the yearly low and it did. The yearly low was $1700 and it’s still below that figure.

8.6% doesn’t differ too much from the last 2 results but the fact that it rose 1% in a single month when the normal rate is 2% for the entire year is very worrying. Most likely 75bps rate hikes on the next fed meet.

During the last 2 years, the M1 and M2 money supply for United States Dollar went up by 150%. And then people don't understand why the inflation rate is going up. Well... it is not rocket science. COVID presented a perfect excuse for the central banks around the world, to print unlimited amount of money. A small portion of this money ended up with the ordinary people, just to make them happy. But the vast majority of this money was distributed among the most unproductive sections of the society, such as the unions and pressure groups.

While it is a shock to the system and is going to be very damaging for the average person if it persists over many years, it's easy to forget that other countries like Turkey are claimed to be suffering something like a 50% real inflation rate. The longer such rates stick around the worse things can get because people seek raises of the same amount which pushes the cost of goods and services up even higher. It becomes a vicious cycle, but the world economy is looking very dysfunctional right now - the Ukraine war is really not helping.

"We’ve never seen anything like Putin’s tax on both food and gas" (https://www.bloomberg.com/news/articles/2022-06-10/biden-says-he-s-focused-on-inflation-but-again-blames-putin).

There are two side to the story:
1. Bitcoin is supposed to grow against inflation due to its limited supply. And it has happened and used to happen. People who noticed that their assets are depreciating due to inflation tends to move to Bitcoin to fight against inflation.

2. Inflation affects all sector of the economy including Bitcoin itself directly or indirectly. In an economy where the inflation rate is very high, people will only struggle to survive and might have nothing left to invest. This affects Bitcoin and other cryptocurrencies.

But in the above scenario, an announcement from US stock is not supposed to have an immediate impact on bitcoin, I could not relate that. It could be a fast decline to colorate with the news or a mere coincidence.

Jerome Powell would have to do his own Paul Volker moment, and tell everyone to "tighten their belts", and raise interest rates higher than initially planned to control inflation. It will a be hard landing, there is currently no other choice but to swallow the truth that everything should be crashing down before it can surge up. Depleted savings, mass lay-offs, business/banking collapse, simply the whole set of what should happen after euphoria MUST happen. A recession.

First of all the number should be higher than officially reported by government then we see the declining in the cryptocurrency market instead of hike because people in need of cash so they will be ready to sell everything they have got and cryptocurrency is easily turned to liquid cash compared to other assets.

Nothing surprising here considering the fact that whole world is suffered with after party of covid. The blame now is on war and there is bigger partition of US in supporting the same and in the process they are loosing import tenders from different countries. Most of the money left Share market as peeps are in need of money for even basic daily needs. The US situation in terms of jobs is also not very well and most of them are seeking low wager jobs for time being. Many things go undocumented. The inflation will keep rising if situation persisted like above further the time.

it seems America should focus on its own country's economy and not need to meddle in other countries' affairs...if only the US government allocated the money they send to Ukraine or to Taiwan for their economic recovery, I think it's better and will help the citizens those who are already struggling to live

I am not entirely sure what this means for even bigger FED interest rate increases. I mean the inflation is high, the money is withdrawing, its the typical playbook for recession right at the door as well. We are going to live through a time where we will see a ton of people who are going to be unable to pay debt, which will be a big problem and then we are going to end up with a ton of banks and other business' not doing so well anymore since people default, and this isn't just loans, I mean business deals done that failed to be paid in full, all of these will end up with the economy being quite terrible in the short future.

The entire market is down, not just crypto. USD is at a 40 year inflation high, we don't know how Bitcoin is supposed to coincide with inflation quite yet during a time where the U.S. economy is on the verge of recession. Most investors don't know where to put their money so you need to give it more time before making conclusions.

Seems a bit unfair IMO that Bitcoin is taking so much critique as if during a period of stagflation crypto should be the only asset to rise in a market where every asset is doing poorly.

Well Venezuela inflation rates are huge crazy big rates. 18000 is really high.

USA at 8.6 is not good and it does hurt the regular person.

My car would fill up at 35 bucks it now fills at 70 bucks.

Jumbo Eggs were 1.79 a dozen now 3.89 a dozen

I would order quality raised lamb steak cut from a leg of lamb for 9 dollars a steak.
They are now 19 dollars a steak.

So I order a lamb roast which is fatty in comparison but cheaper.

Do political leaders care?
Connecticut suspended gasoline tax  until Jan 1
New York suspended gasoline Tax a month later Until Jan 1
New Jersey is making us pay the tax and no relief.

So three states and 2 did something while one did nothing.

As a person who lived most of my life in a country with a pretty volatile economy and some years of very high inflation (like 40% high), I think that most people won't notice the 8.6% inflation. First of all, it doesn't directly translate into the same price growth. Secondly, it can be a bit corrected by increasing salaries. Thirdly, you are unlikely to notice a change like that, not unless you're already from a very vulnerable group and barely made ends meet.
The pandemic hit the economy hard, the economy which was predicted to get an economic crisis around 2020-2021 before the pandemic started. Then the sanctions, tens of billions of dollars to Ukraine are of course also impacting it. But I think the question should not be about the economy growth declining and inflation rising. It should be about the moral responsibility to stop a crazy genocidal war that brings pain and suffering to so many people and is likely to affect even more people due to things like Russia blocking the sea and Ukrainian grain being unable to thus reach the countries that heavily rely on it.

Unfornetly the inflation rate is rising every time when a special event comes up like the war between Ukraine and the Russian government and sometimes it raising just for no reason and because of the printing of money by the government. During the last days and weeks when it was below 8 many government fans were saying the governments will think of a way to make everything better and it's 8.6. Regarding the inflation rate, we know it's raising long term but I think it's not all and it's not just rising long term because if you compare it with the last years you will understand when the speed of inflation rasing rate is increasing, in this situation the only way to save the people is to let them invest on assets like bitcoin and stay safe from the inflation.

I am quite impressed by the fact you are spending double only on fuel already, that is quite a blow.
And I thought eggs were cheaper there than here, we buy 30 regular eggs for 5$.

And when I asked about measured taken by government to relieve the inflation (or the effects of it on populance) I meant anything done nation-wide, maybe some measured taken by the federal government?

I have seen some news here and there but I don't have quite a good picture of the situation yet.
Last time I checked USA was one of the leaders on crude oil extraction on the planet and you had relatively zero oil exports, then I am not quite sure what is going on? Did you stop drilling or something? Are Exxon, Shell, Texaco speculating with these near 6$/gal prices for ther sole benefit?

Also, I am aware that the situation between our countries is different I would not expect USA to face a 5 figure inflation I just wanted to give some context to those who were not quite familiarized with the magnitude of the inflationary phase here.

It is natural that all markets are affected by each other, when inflation occurs it will be followed by deflation due to the decrease in purchasing power of people, so they will not be able to buy more bitcoin and this will necessarily lead to a deflation in the crypto market as well, perhaps this is what happened, although it is supposed That people go to buy bitcoin as a hedge against inflation, but perhaps people are still afraid of the volatility of crypto prices, especially after the recent incident.

Well actually it does, starting from the price of fuel that has been increasing then groceries will as well and so that would affect the cost of living as well. Everything does connect and although it might seems small but eventually it could be an issue if no action is actually taken to suspend the increasing rate of the inflation.


It does but with the increasing price of fuel I kinda doubt that business owners would actually increase the workers salaries


This is sad but true at the same time because everything just seems expensive when you are barely making it

Back in 2021, one of the reasons why Bitcoin went up by so much was because of the stimulus cheques. A lot of people received the cheques and decided to purchase Bitcoin or other cryptocurrency using that amount. But the situation has changed now. As a result of inflation and rising fuel prices, ordinary people are running out of money. They don't have spare money to invest in "luxury" options such as Bitcoin. This is the main reason why Bitcoin crashed from a peak of $67,000 per coin to the current level of $28,000 per coin.

It’s not the reason why it crashed.

Last year we all knew that fed would raise rates to combat inflation. Everyone knew all the crypto and stock markets would peak.

People are basically getting into safer risk off assets and Bitcoin is considered an risk on asset like stocks. Hence why it highly correlated with tech stocks.

Bitcoin is not the only thing that dropped.

Will there be a chance FED started raising it again in order to contain the inflationary numbers?

I ask this because I have seen on the News that they have already recognize to be wrong about the inflation being transitory, etc. They even admited there will likely be a long inflation period in the USA.

What are they going to do about it?

I have been seen people on Fox News to suggest this inflation was intentional so the USA government (which is a major debt holder) can pay its debts at discount, with inflated USD. That sounds crazy to consider if you ask me  ???

They stopped saying it’s temporarily like 3-4 months ago. Now the markets are going to see what happens on Wednesday and see if a 75bps hike is going to happen.

If a 75bps hike is on the table then the markets will go down further. Because many are going to get out of risk on assets into more safe havens.

The way it’s looking it seems best to stay cash and be able to buy stocks and real estate when they are cheap when the market finally bottoms.

The currency is theoretically resistant to inflation. But the problem is that people are not realizing this and think "if fiat currencies are inflating then so to must be cryptocurrencies" and they dump their coins, and their actions are reinforced by past downtrends of cryptocurrencies, correlated to inflation rises, which themselves were due to weak hands and this unsound thinking.

This stuff is going to keep happening until BTC gets enough customers, shops & terminals for people to deal with it exclusively without an intermediate fiat currency like USD or EUR.

If i understood you correctly NotATether you are referring to fud here, isn't it quite normal with any and every volatile asset, of which bitcoin is one, some people purposely spread this fud, and some purposely move large sums from their wallet to exchanges, just to cause fud, and to probably buy cheaper when there is the resultant downtrend. Bitcoin is deflationary, but volatility is ever present cause people will always panic.
That is going to be in a very long time i suppose, well those who really understand bitcoin and are stronger hands will continue buying from the weak hands till that time, it is in their favor in the end.

Over the last six months to a year, I've seen prices of things increase at a rate that's alarming--and I'm generally not easily alarmed by stuff like that, since I'm a pretty frugal person by nature.  But damn, a standard-size bag of Cheetos is now well over $5, and that's more than a gallon of gas (but it seems to be a race between those two things). 

This is a problem created by the government which no doubt they're going to attempt to solve.  Unfortunately I have a sinking feeling that their solution is only going to cause more financial pain.  And without delving too far into politics, I just want to say that I'm hoping Biden doesn't get re-elected.  I do realize that inflation is a global problem and that it isn't his fault that the world is in this state, but I don't think he has any capability to lead the US out of this inflation *soon-to-be* crisis.

What a paradox!

The governments of different countries behave in a similar manner. Sometimes I wonder if they meet occasionally and decide how they will manage their respective countries. I have watched keenly in my country how the government in countless occasions created problems from vacuum and then spend resources to solve an induced problem, which definitely will end in bigger pains.

I am young and energetic, that is the reason I am always thankful to God for making me to be part of this industry. I am most hopeful that if decisions about Bitcoin can be made without some central authorities, it therefore mean that one day the common man can be part of the governing system of their country through blockchain concensus.

Looking at the volume of money that the central banks printed during the COVID time, I am surprised that the inflation rate is not any higher. Just 8.6%? Are we sure that these guys are not lying? The M1 money supply went up by like 4-5 times. The population remained the same (or slightly decreased as a result of deaths from COVID), and that means that there is 4x or 5x more money available for everyone. Naturally, I would have expected inflation rate in the vicinity of 100% or 200%. If that is not happening, then the reason maybe that most of the money ended up with people who are not supposed to receive it.

Its like Cardi B asking When y'all think they going to announce that we going into a recession? (https://twitter.com/iamcardib/status/1533483036783697920)

Yep they only say it when its pretty much obvious already. The inflation does affect every country so we're all in this together. I hate to say it but crypto market is adding the stress lately because it didn't act like a hedge anymore. Felt deceived. 

From what I have seen on internet, the function

Inflation(Money_Supply)

is often modeled as a lineal function or combination of lineal functions of the type

f(x)= bx+c , the critical part of this type of function is the slope "b".

Maybe, in the case of the current USA economy the function between the money supply and the inflation has a very low slope at the time being, a fraction of the unit (1).

If I could have access to monthly FIAT emission data and montly inflation data, I could estimate de slope of the function.
Do you know where I could find such information?

Maybe the inflation is not as high as you could have anticipated because some big companies are keeping big reserves in cash, let us remember that during the pandemic there were news about how companies and the rich were earning much more during those times.

If the average American spent their stimulus check on a basket of essencial goods, it would not be strange that all money ended up in the pockets of big players like Walmart, which have decided to keep the cash until now and therefore, out circulation. Who knows, this could be a deal between these big players and the US government/FED.

Bitcoin is seen as an anti-inflation asset, but with the current situation, it has not been able to promote that. High inflation leads to higher interest rates, volatile assets like bitcoin and cryptocurrencies will be under great pressure, people will sell and seek safe havens like dollars. In the long run, it is beneficial to hold bitcoins as the price of bitcoin always increases year by year but in the short term bitcoin is not a good solution to avoid inflation.

So far, Bitcoin has not been able to guarantee it as an anti-inflation asset,
in the midst of inflation that is happening in almost all countries, the crypto market is also currently back down and the price of Bitcoin is down to $22k,
this shows that in the short term it is too risky and Bitcoin is not the right choice to avoid inflation as you say

I disagree...

When the Inflation goes up, people are paying more for goods and services... so they go into survival mode and they do not have disposable funds to invest in speculative high risk investments like Bitcoin.

The influence of the war in the Ukraine are only being felt now, because food production has been disrupted. We have been using wheat and oil that were stockpiled, but the new crops will suffer..do to the shortage of fertilizer from the Ukraine and the smaller exports from Russia.  >:( 

As far as the algorithm (controlled supply) doesn't change, Bitcoin will remain as an asset that is protected against inflation. I will not give too much importance to the short term fluctuations in the exchange rate. As of now, I don't think that there is any valid reason for Bitcoin to go down in exchange rate versus the US Dollar. The former is protected against inflation, while the latter is about to undergo hyperinflation as a result of all those trillions printed during the COVID season. That said, for those who are looking for short term returns, Bitcoin may not be the right asset.

Let's be honest, raising the rate by 75 basis points (ie 0.75%) will not solve the inflation problem in the US. Let me remind you that in 1980 the Fed had to raise the rate to 20% to curb inflation after the oil crisis. Now the Fed, in my opinion, needs to raise the rate to at least 10% in order to bring the situation with prices under control, but this will lead to disastrous consequences for the stock market and cause a whole wave of corporate bankruptcies, not to mention enormous difficulties for the US government to service external debt.

Technically speaking you are right. Bitcoin is designed to avoid the inflation which is fiat main disadvantage, however Bitcoin is valued in fiat and it will always be connected to fiat so even if its long or short term, Bitcoin will still be affected by inflation not directly but once fiat value decrease, Bitcoin value will decrease because fiat is what people used to buy it and gives value on it. Bitcoin value is only derived from speculation because there's no asset with real value backing its price that's why a simple FUD can affect already Bitcoin price due to speculation.

I don't think that in the long term situation will remain the same. There is a good chance that Bitcoin will become independent of fiat. Already in two countries (El Salvador and Central African Republic), Bitcoin is legal tender along with fiat currency. In due course of time, we will witness Bitcoin becoming the sole legal tender in at least some of the countries. And this is a first step towards Bitcoin becoming independent of fiat currency. Anyway, all this seems to be impractical in the short to medium term. I will watch patiently, as more and more countries legalize Bitcoin and adopt it as the legal tender.

Bitcoin is not changing its properties, the people's perceptions are. I think from now on it will be hard to sell Bitcoin as a hedge against inflation or economic uncertainty. I guess the narrative would switch to censorship resistance and privacy, though these things are much harder to sell to general population than value going up as a reaction to inflation. Or maybe the economic hedge narrative will have its second chance if a bull market will happen while the global economy is in a recession.

The next 2-3 years will be very interesting for Bitcoin, it's nothing like any previous years, so it will be a huge test for it.