Crypto community divided over whether Bitcoin is an inflation hedge

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Amid a massive spike in the U.S. Consumer Price Index (CPI), the cryptocurrency community has been divided over whether Bitcoin (BTC) is really a hedge against the inflation.

The CPI, an indicator measuring the average change in the prices consumers pay for a basket of goods and services, experienced its largest month-on-month increase in June in the past 13 years, Business Insider reported Tuesday. The surge in inflation would have started in March, when the CPI rose 2.6%, followed by subsequent increases in April of 4.2% and finally 5.4% in June.

But despite the recent growth in inflation as measured by the CPI, Bitcoin has reportedly failed as an inflation hedge as its price almost halved from $ 64,000 in mid-April, some analysts say. .

Interestingly, as the #inflation CPI fell from + 1.4% y / y in January to 5.4% in June, #Bitcoin has essentially been cut in half.[Past performance is no guarantee of future results] pic.twitter.com/QIXeb2m5Vv

Liz Ann Sonders (@LizAnnSonders) July 13, 2021

Bitcoin no longer behaves as a hedge against inflation and will continue to beat expectations for higher returns, Ed Moya, senior equity analyst at foreign exchange firm Oanda said on Tuesday. However, this inflation is seen as transient, which could explain why the June CPI report was not a sufficient catalyst to break Bitcoin sideways trading, Moya added.

The crypto community then reacted to these observations of the CPI against Bitcoin, with many industry advocates pointing out that their early Bitcoin investments and gains have already covered the future. Some Bitcoin enthusiasts have pointed out that Bitcoin has experienced historic growth, showing massive gains over the long term.

inflation hedge #bitcoin pic.twitter.com/OjhUY5OLJV

Hajek.HODL (@hajek_miloslav) July 13, 2021

Related: Bitcoin Boon As US Inflation Hits 13-Year High, Wages Drop to 21st Century Low

According to some crypto experts, Bitcoin is indeed not a great hedge against inflation. Mati Greenspan, founder of fund management firm Quantum Economics, told Cointelegraph that there does not appear to be a correlation between Bitcoin price action and inflation or deflation data, saying:

Granted, Bitcoin has performed very well over time. But most of the gains came during a major global deflationary period in which all risky assets rose. Now that inflation is picking up in earnest, for the first time since Bitcoin’s inception, it is significantly underperforming.

The latest argument triggered by the CPI brings another twist to the long-standing debates about Bitcoin as a hedging instrument. A number of financial analysts, including Nassim Taleb, believe that inflation has nothing to do with the price of Bitcoin. Yet some global investors, such as Paul Tudor Jones, have turned to Bitcoin to protect their investments from inflation.

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