Bitcoin continues to slide, casting doubt as an inflation hedge as costs skyrocket

Bitcoin, which was once touted by crypto enthusiasts and wealth managers as a hedge against inflation, has continued to decline in recent weeks even as new data has shown costs to skyrocket.

On Tuesday, the Labor Department announced that its consumer price index, which measures a basket of goods and services as well as energy and food costs, jumped 5.4% in June from the previous year, the fastest pace in 13 years.

US stocks fell on the open while bitcoin held steady and fell steadily throughout the morning and afternoon.

Even on Wednesday, after several major Wall Street players expressed concern that inflation was not a temporary hang-up, but rather that high prices are here to stay, bitcoin remained almost at the same level as before the CPI announcement, trading at around $ 32,800 per coin.

The recent wave of warm inflation data dates back to March, when the CPI hit 2.6% from the previous year. In April, this figure rose to 4.2%, then to 5.0% and 5.4% in May and June.

Briefly in March, bitcoin appeared to rise along with the CPI numbers, reinforcing the argument that it is protecting holders from a weakening US dollar. Crypto peaked in mid-April at over $ 62,000 per coin.

But then, as inflation worries continued to worsen through the spring, bitcoin reversed course, cutting its price in half as Americans’ purchasing power rapidly dwindled, that is to say. that time that many predicted that bitcoin would prove to be the most valuable.

“Bitcoin no longer behaves as an inflation hedge and will continue to beat expectations for higher returns,” Ed Moya, senior equity analyst at foreign exchange firm Oanda, said in a note to clients on Tuesday.

True, some have said that bitcoin needs more time for its price to reflect rising inflation. David Morris, Columnist at CoinDesk, argued that perhaps now is a good time to buy bitcoin if inflation continues to rise.

“If you lose faith in the Fed (or if you didn’t have much to start with), there is growing strong empirical evidence that bitcoin should be on your shopping list,” he said. written.