How Does Rising Inflation Affect Bitcoin Prices?

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Bitcoin is considered a better hedge against gold against inflation

People invest in cryptocurrency for different reasons. While some want to make profits, others see a quick way to increase their wealth. Yet there are others who see it as a store of value. But most of them would agree that cryptocurrency, especially Bitcoin, is a great hedge against inflation. This is when inflation rises, the value of money depreciates. To overcome this recurring problem, many people invest in assets that are almost certain to increase in value at a rate greater than inflation. This strategy ensures that the net worth of their investment remains positive despite inflation which eats away at the value of their savings.

Bitcoin’s rapid growth over the past year has made investors see the potential to beat inflation. So instead of putting their money in gold or real estate, a lot of them are entering the cryptocurrency industry.

According to a Bloomberg report, analysts at JPMorgan wrote that the recent rally in Bitcoin was primarily driven by the perception that it was a better hedge against inflation than gold. Investors around the world are worried about rising rates of price hikes, which has rekindled their interest in inflation hedges, including Bitcoin.

Bitcoin was trading at around Rs 47 lakhs on October 22, at the time of writing. It has increased by around 125 percent so far this year. On the other hand, gold has fallen 8% since the start of the year. It also proves that people see Bitcoin as a better investment option than the yellow metal. What also works in favor of Bitcoin is that its supply is limited, in part like gold.

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In India, consumer price inflation has remained above the Reserve Bank of India’s 4% target for most of last year. With the rise in global crude oil prices, many people fear that inflation will continue to rise in the near term.

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