Bitcoin doesn't like high inflation either

[stompix]

Lately, a number of topics have started to pop up,^1,2 with users really questioning if Bitcoin has shifted its role (for some), and rather than a hedge against inflation it has become something completely different, and I'm thinking that there is general shift in this direction.

Today was the most awaited day of the week for all traders as inflation numbers were to be published and even crypto traders and crypto blogs seemed to echo one thing, lower inflation is going to be good for bitcoin price.

Covering July, the data was due at 8.30am Eastern time Aug. 10, with expectations demanding it show that U.S. inflation had already peaked.
“CPI prints have been pretty pitoval for BTC price action,” Blockware lead insights analyst William Clemente wrote in part of a tweet about the event, adding that CPI would form a “big day” for crypto.

Should the CPI rise above the consensus expectation for an 8.7% increase, assets on traditional and digital markets will likely fall in price on expectations of another interest rate increase after September’s Federal Open Market Committee meeting.

And the outcome of the announcement that rampant inflation has indeed cooled off, with

"The Consumer Price Index climbed 8.5 percent in the year through July, compared with 9.1 percent the prior month, a bigger slowdown than economists had projected. "

 well, bitcoin didn't disappoint:


Let's not even try to think this was a coincidence, the spike was like ~3 minutes from the CPI number release, no, not even a chance of being something else, and the only news about crypto in the papers is that Coinbase has lost a billion last quarter, which I wouldn't call positive.

So, at this point, can we start thinking that, looking alone at the price and not usage or adoption or anything else, a good economy with lower inflation and constant economic growth is far better than the recessions, bloodbaths, economical wars that were supposed to bring the price to 1 million a piece since every starved jobless zombie would buy coins?

[jackg]

The predicted inflation rates are inversely proportional with disposable income amounts so yes I'd expect bitcoin to boom when the economy starts to recover and improves/remains stable.

It might change though when people who drop some investments during a crisis like this see crypto might be an option that can weather the storm that's a bit different (e.g it's not like bonds and gold that have more of a limited, controlled or manipulated price in some ways).

[fzkto]

Bitcoin moves with the other major indices. The NASDAQ and S&P indices bounced sharply after the release of this positive news. Along with this, bitcoin also showed gains. Therefore, I don't think we can talk about bitcoin as a separate asset at this time. If bitcoin was not tied to the stock markets and did not show a clear correlation, then we could talk about it as a phenomenon. But now it follows the rest of the market, so it is no surprise that it has risen.

[stompix]

The predicted inflation rates are inversely proportional with disposable income amounts so yes I'd expect bitcoin to boom when the economy starts to recover and improves/remains stable.

Probably the demand destruction happening with oil as it went down despite inflation going up and now that finally inflation seems cooling has recovered some 3% is another clue, people won't spend if they don't have money to spend. People won't buy bitcoins if they don't have money for food and rent, and the whole idea that somehow millions of users that have no power and no bank account will be able to invest enough just to balance the daily mined coins iswell too far fetched.

Bitcoin moves with the other major indices. The NASDAQ and S&P indices bounced sharply after the release of this positive news.

Yeah, another nail in the coffin for the idea that BTC does;t care about the market conditions, I remember a topic about the correlation, guess I'll bump it cause this event is interesting.

[LFC_Bitcoin]

Bitcoin is actually the best hedge against inflation there is. If you started buying bitcoin in 2009 to 2015 then I don’t think there is an asset comparable to how well bitcoin has done. Your money would have done a lot better than protect against inflation.

Sure since inflation hit 8% & higher bitcoin hasn’t done as well but we’re in a bear market, this would have happened to the bitcoin price any way.

Let’s see how bitcoin does vs inflation over the next 10 years. I’m very confident it will have defeated most other traditional investments by many magnitudes.

Bitcoin is a mid to long term investment, not a get rich scheme.
Fiat money is losing purchasing power every year for a very, very long time. Bitcoin fixes this.

[stompix]

Bitcoin is actually the best hedge against inflation there is. If you started buying bitcoin in 2009 to 2015 then I don’t think there is an asset comparable to how well bitcoin has done. Your money would have done a lot better than protect against inflation.

I will never say that bitcoin is not a hedge against inflation, even if bitcoin would be dropping in price for a while it will still long-term beat any inflation unless something of catastrophic magnitudes happens. I've amended the title to high to enforce a bit what I was trying to say, if you look just at the price and not correlate that with purchasing power it's clear that it will not grow fantastically in a period of prolonged inflation, it will be able to keep on top looking at the rates but nothing spectacular.

One thing, let's not say 2009! Common, you can actually count the numbers of people who bought coins in 2009 with your fingers.

Sure since inflation hit 8% & higher bitcoin hasn’t done as well but we’re in a bear market, this would have happened to the bitcoin price any way.

And are you sure that if the economy was doing fine and there was no inflation and no war bitcoin would still be in a bear market?
That was actually the essence of this, are you sure it follows it's following its own path and is not actually getting more and more tied to the world events?

Bitcoin is a mid to long term investment, not a get rich scheme.

Bitcoin is a tool, you can use it as you seem fit, you can use it as a currency, you can use it as a hiding place for your wealth, you can use it as a long, medium, short-term investment, and you can still look at it as a quick rich scheme, that's the thing I love about it, that unlike anything else it offers the flexibility of choice.

[dragonvslinux]

The first mistake people make is assuming that Bitcoin was ever a hedge against inflation, as it never has actually done this, only in a theoretical sense based on it's regulated inflation. How can an asset be proven be to a good hedge against (high) inflation in practice when there hasn't been high inflation during it's existence until now? The theory is solid, but the reality remains to be seen.

Bitcoin has never existed (until now) in a period of high inflation or recession. To me the idea is that long-term Bitcoin will become a hedge against inflation, but while it's value is less than $1 trillion and therefore can't realistically be considered a reserve asset or store of value by most, that time is still far away. Bitcoin has only existed during increases in speculative markets, since the 2008 global recession.

Bare in mind that when high CPI numbers were previously announced on July 13th, considered bearish, Bitcoin rallied +20% from the lows within a week. Now lower CPI numbers have been announced, and Bitcoin has rallied from support levels. What's becoming clear is that Bitcoin cares much less about CPI numbers or inflation than many would like to believe, as price has since increased regardless.

I also think it's too early to tell if Bitcoin will be a good hedge against inflation in this period. For example after the dotcom bubble finally popped in March 2000, Gold didn't increase in value, but instead continued to lose value for another year. It was only until March 2021 that price bottomed out as S&P/Nasdaq continued to decline. It took until half of that bubble had popped before Gold became a hedge basically.

[BlackHatCoiner]

To me the idea is that long-term Bitcoin will become a hedge against inflation

Basically, that's what it's all about. Speculation. Even though I (and millions of others) experience high gains, and therefore does fit the "inflation hedge" category for us, it doesn't mean it does for those who bought recently.

I just think of it like this:

• Bitcoin has better characteristics than gold, to be considered as a store of value.
• Bitcoin can hardly be confiscated, opposed to every other asset. This can attract institutions and individuals in a world war scenario and/or other totalitarian treatments.
• Cash will go extinct, sooner or later. Bitcoin can't just disappear like that. It might be the only cash available in the future.
• The supply is non-negotiable. It can't be altered. Inflation rate is steady. Try finding another asset with such probable supply schedule.

For these reasons, I strongly believe it has a bright future, and is potentially an inflation hedge in the long-term.

[Tytanowy Janusz]

There are many forces that drive bitcoin price. X% of investors treat it like speculative asset (first to dump during bad times, first to buy when things starts to looks good) Y% of investors treat it like safe haven/digital gold and DCA all the time or do "buy the dip". Z% do have different approach. XYZ varies depending on the bitcoin adoption, market cycles and many more. The fact that after inflation data announcement bitcoin pump (just like every single asset) only proves that we have X investors here that dominated this trading hour because they were motivated to buy just after first positive inflation announcement. It does not invalidate the fact that we have Y or Z investors that still do their investments based on other criteria. They were not on the market during this 1h pump because they don't do financial decisions based on short term data that might be manipulated because of upcoming election. They belive in long term bitcoin advantage over any other asset. X is responsible for short term price action, Y is responsible for long trends (years/decades) because they continue to accumulate limiting available supply.

Why X investors bought bitcoin after good inflation data combined with reduced unemployment? Because they calculate in the fact that we will come back to printing (aka devaluating fiats in long term) sooner than later.

So, at this point, can we start thinking that, looking alone at the price and not usage or adoption or anything else, a good economy with lower inflation and constant economic growth is far better than the recessions, bloodbaths, economical wars that were supposed to bring the price to 1 million a piece since every starved jobless zombie would buy coins?

Bitcoin was never a recession/depression/stagflation hedge. Its more like entire monetary system collapse hedge.

[savetheFORUM]

The predicted inflation rates are inversely proportional with disposable income amounts so yes I'd expect bitcoin to boom when the economy starts to recover and improves/remains stable.

It might change though when people who drop some investments during a crisis like this see crypto might be an option that can weather the storm that's a bit different (e.g it's not like bonds and gold that have more of a limited, controlled or manipulated price in some ways).

This is very true, we are going to see bitcoin go bonkers when the time comes. All that money they printed and caused the markets to go up, didn't just magically disappeared, it's there. When the day comes, I am expecting a very easy 100k for bitcoin, and probably at least 10k for ethereum and 1k for bnb as well.

When those happens, which it could easily happen, could be more than that, then we are going to realize that buying bitcoin was one of the best decisions we made, and people who didn't will regret it a lot. Which is why I am proud to own as much as I can, still not even a single bitcoin, but I will get there overtime by buying more and more each month.

[hatshepsut93]

So, at this point, can we start thinking that, looking alone at the price and not usage or adoption or anything else, a good economy with lower inflation and constant economic growth is far better than the recessions, bloodbaths, economical wars that were supposed to bring the price to 1 million a piece since every starved jobless zombie would buy coins?

I bet that people would still think that any calamity is good for Bitcoin, because Bitcoin is against fiat and governments. So if something hurts them, then it's good for Bitcoin. The previous narrative before the "hedge against inflation" was "global currency that will replace fiat and banks", and that narrative is still present in Bitcoin circles.

[RealMalatesta]

Bitcoin is actually the best hedge against inflation there is. If you started buying bitcoin in 2009 to 2015 then I don’t think there is an asset comparable to how well bitcoin has done. Your money would have done a lot better than protect against inflation.

Sure since inflation hit 8% & higher bitcoin hasn’t done as well but we’re in a bear market, this would have happened to the bitcoin price any way.

Let’s see how bitcoin does vs inflation over the next 10 years. I’m very confident it will have defeated most other traditional investments by many magnitudes.

Bitcoin is a mid to long term investment, not a get rich scheme.
Fiat money is losing purchasing power every year for a very, very long time. Bitcoin fixes this.

Reality is that we shouldn't really be considering it only against inflation neither. Bitcoin is better investment than anything else. People look at bitcoin and think that it lost value against inflation, but in reality we will make that back quickly and that's fine, that's all I care about.

And if you look at other investments then you will realize that nothing gained as much as bitcoin neither. Meaning you are looking at something that can make you the richest, and you are only arguing on how it will do that. That's personally not something I really like, it doesn't make sense to me at all that there are people who think that way at all.

[Fundamentals Of]

I think it cannot be denied at this point that Bitcoin could actually be affected by the state of what makes up the traditional economy. Bitcoin, although labeled as a hedge or a non-correlated asset or simply an alternative, is actually very much affected by the things that affect stocks and fiat currencies. Wars, high inflation, rising interest rate, recession, pandemic, global supply chain problems, and other macroeconomic factors are actually affecting Bitcoin.

[rhomelmabini]

I think it cannot be denied at this point that Bitcoin could actually be affected by the state of what makes up the traditional economy. Bitcoin, although labeled as a hedge or a non-correlated asset or simply an alternative, is actually very much affected by the things that affect stocks and fiat currencies. Wars, high inflation, rising interest rate, recession, pandemic, global supply chain problems, and other macroeconomic factors are actually affecting Bitcoin.

Additionally, market cap is still low, we also know how volatile crypto in the first place. So, macroeconomic factors are still have huge participation to the price of Bitcoin and other cryptocurrencies. Through time when market cap is huge, can we say that Bitcoin is really a hedge against inflation?

[justdimin]

So, at this point, can we start thinking that, looking alone at the price and not usage or adoption or anything else, a good economy with lower inflation and constant economic growth is far better than the recessions, bloodbaths, economical wars that were supposed to bring the price to 1 million a piece since every starved jobless zombie would buy coins?

I bet that people would still think that any calamity is good for Bitcoin, because Bitcoin is against fiat and governments. So if something hurts them, then it's good for Bitcoin. The previous narrative before the "hedge against inflation" was "global currency that will replace fiat and banks", and that narrative is still present in Bitcoin circles.

That's not the main aim, but that's something that is definitely not out of reach. What hurts banks does hurt bitcoin I agree with that, but at the same time I do not think that it is a good reason to go back to banks neither. Meaning, bitcoin may get hurt, but we are all equally hurt here, whereas in the banking world, banks are not hurt, but you are. Just look at 2008, there was a house and mortgage bubble, right?

Well, those banks got bailed out, meaning if you didn't pay your mortgage, they were hurt, and took the home from you, and they were bailed by the government and KEPT the house, whereas you just lost. Why weren't the people bailed out? Why did banks? Here in crypto, we are all equals, nobody gets bailed out. That's why we prefer it here.

[Fundamentals Of]

I think it cannot be denied at this point that Bitcoin could actually be affected by the state of what makes up the traditional economy. Bitcoin, although labeled as a hedge or a non-correlated asset or simply an alternative, is actually very much affected by the things that affect stocks and fiat currencies. Wars, high inflation, rising interest rate, recession, pandemic, global supply chain problems, and other macroeconomic factors are actually affecting Bitcoin.

Additionally, market cap is still low, we also know how volatile crypto in the first place. So, macroeconomic factors are still have huge participation to the price of Bitcoin and other cryptocurrencies. Through time when market cap is huge, can we say that Bitcoin is really a hedge against inflation?

What's the connection? I don't understand you.

Macroeconomic factors affect Bitcoin most probably because the players in the Bitcoin market are also exposed to the traditional market. So whatever happens to the traditional market will somehow affect the Bitcoin market as well. It is not because of its market cap and its volatility. Its market cap just reflects Bitcoin's price. On the other hand, Bitcoin's volatility has always been present.

Whether Bitcoin is a hedge against inflation or not is not about its market cap. It's about how it moves compared to the traditional market.

[posi]

I think it cannot be denied at this point that Bitcoin could actually be affected by the state of what makes up the traditional economy. Bitcoin, although labeled as a hedge or a non-correlated asset or simply an alternative, is actually very much affected by the things that affect stocks and fiat currencies. Wars, high inflation, rising interest rate, recession, pandemic, global supply chain problems, and other macroeconomic factors are actually affecting Bitcoin.

Additionally, market cap is still low, we also know how volatile crypto in the first place. So, macroeconomic factors are still have huge participation to the price of Bitcoin and other cryptocurrencies. Through time when market cap is huge, can we say that Bitcoin is really a hedge against inflation?

In the long run, it still remains an effective hedge against inflation. As @LFC_Bitcoin said, if you buy bitcoin from 2009 or as recently as 2017 and hold it to this day you have also made a substantial profit, if you hold fiat the value of the fiat has decreased somewhat. This is proof bitcoin has been an inflation hedge from the beginning.

Bitcoin is also part of the financial markets so it is certainly not immune to the short-term effects of crises or recessions, but the long-term is a different story.

[Poker Player]

I believe there is some truth in the two competing statements about whether bitcoin is a hedge against inflation, or whether it likes high inflation.

On the one hand, if we consider so far, yes, Bitcoin has been the best hedge against inflation since its inception if we compare it to gold, the stock market or the real state.

But what stompix points out makes sense, as it was a common thought that scenarios like this year, and more so given all that has been printed in the last two years, were going to drive the price into the stratosphere. Recall the predictions that were being made last year, before the war broke out, about ATH for this cycle, which were much higher than what actually happened.

Would Bitcoin have a higher price if there were no war and no inflation? I think so, among other things because some of the money that people spend because of higher prices due to inflation could be invested.

So, one has to ask whether once the Bitcoin market has matured, and has a decent market cap, whether the returns are going to be lower going forward in percentage terms, which is quite likely, and whether there will be other assets that are better against inflation, such as real estate in good locations bought at a good price.

I believe that in view of this we can only observe and draw conclusions in the light of events.

[hugeblack]

I think we need to wait a few years to start testing these hypotheses about whether or not Bitcoin is the best hedge against inflation given the nature in which the price moves seem separate from what is happening in the world.
Other than what happened when the covid-19 was declared a global pandemic, as it was the only external cause that directly affected the price.
As for everything that happens in it affects the aspects of supply and demand, which appear quickly in the price, but I expect that all of them will disappear when we reach a market capacity of more than 10 trillion dollars.

[perfect999]

So, at this point, can we start thinking that, looking alone at the price and not usage or adoption or anything else, a good economy with lower inflation and constant economic growth is far better than the recessions, bloodbaths, economical wars that were supposed to bring the price to 1 million a piece since every starved jobless zombie would buy coins?

I bet that people would still think that any calamity is good for Bitcoin, because Bitcoin is against fiat and governments. So if something hurts them, then it's good for Bitcoin. The previous narrative before the "hedge against inflation" was "global currency that will replace fiat and banks", and that narrative is still present in Bitcoin circles.

Is that the same to those who said that covid 19 and wars is good for btc? Because, they believe it did affected its price in a positive way because of how it worked like people are forced to stay at home and governments are requesting for a donation in the form of btc and other cryptos. They only think about the price but they forget its negative effects to the society.

It is possible for btc become a hedge against inflation because of its unique characteristics but for it to replace fiats and banks? No I don't think so. These narratives are only two of the many that bitcoin circles are using in order to motivate themselves and the others.