Bitcoin Flirts With $ 69,000 Following Soaring Inflation News | Crypto News

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Bitcoin supporters have long argued that the world’s most valuable cryptocurrency can serve as a hedge against inflation.

By Vildana Hajric and Emily GraffeoBloomberg

Posted on November 10, 2021

Bitcoin has hit a new high and is flirting with $ 69,000 for the first time after inflation data reinforced the argument that cryptocurrency is a hedge against mounting cost pressures.

The largest digital asset by market value rose 1.9% to $ 68,991 on Wednesday, breaking the previous high set Monday night in New York trading. Other coins rose as well, with the Bloomberg Galaxy Crypto Index – which tracks major cryptos – gaining as much as 2.4% to hit its highest level since May.

The rise in the token can, at least in part, be explained by the fundamental argument – which has gained ground in recent months – that Bitcoin can act as a hedge against inflation. Crypto proponents argue that unlike the dollar or any other traditional currency, the digital coin is designed to have a limited supply, so it cannot be devalued by a government or central bank that distributes too much.

“Bitcoin continues to benefit from the rally that started in August and gathered pace in September and October,” said Sui Chung, managing director of CF Benchmarks, an administrator of cryptocurrency benchmarks. The final leg of its rally began in anticipation of the October launch of a Bitcoin-futures ETF, but “now appears to be fueled by the sustained inflation that we are seeing in all of the major economies around the world.”

Prices for everything from food to gasoline to housing have risen faster and have been more rigid in recent months than many economists had expected. Consumer prices in the United States rose last month at the fastest annual rate since 1990, cementing high inflation as a hallmark of the pandemic recovery and eroding purchasing power even as wages rise.

Major Wall Street players have said they bought the coin – or are interested in it – thanks to the inflation hedging thesis. Their case was reinforced by the fact that gold, generally viewed as a hedge against inflation, has underperformed in recent months as Bitcoin has moved higher.

Yet others argue that it doesn’t have a long enough history to establish that it can in fact act as an inflation hedge. Cam Harvey of Duke University has made this argument in the past, saying that theoretically, if investors come to see it as similar to gold, Bitcoin could hold its value in the very long term, like a century from now. or more. In his research on gold, he found that it has held its value well for millennia. But he’s also found he’s prone to fads and accidents over shorter periods of time.

Matt Maley, chief market strategist for Miller Tabak + Co., says many investors see it as a hedge against inflation, but he’s not convinced it will work well.

“I’m not saying it won’t – I just think gold has worked as an inflation hedge for centuries, so people should use gold in combination with Bitcoin as a hedge,” a- he declared.

The spot price of gold has fallen 1.8% this year, while Bitcoin has gained more than 130% during this period, according to data compiled by Bloomberg.

“People are looking for places to put their money,” said JJ Kinahan, chief market strategist at TD Ameritrade by phone. But, he added, “It’s hard to say whether this is an inflation hedge or not because we haven’t experienced inflation with cryptocurrencies. It’s one of those things where everyone thinks it will be, but time will tell.

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