As bitcoin is becoming popular every day, many institutional investors are also part of cryptocurrency. As a result, there has been a significant increase in BTC prices. Recently, bitcoin reached the all-time highest price and then fell back again. The reasons behind it are multiple. Some people say that it is all result of the emerging omicron virus and the coronavirus pandemic threat that may occur again, just like 2020. However, others are anti to this argument.
Some people say that all the price fluctuations that are going on in the prices of bitcoins result from different situations like the Kazakhstan riots, the Federal Reserve policy, and many other international factors. No matter the reasons behind the price fluctuations, bitcoin has been on the verge of getting a lot of criticism from the people because of the rising inflation. Some people are considered an excellent hedge against the infection, while others do not believe the same.
Is it a good hedge for inflation?
The beginning of 2022 is not suitable for the most popular crypto coin worldwide, Bitcoin. In November last year, it reached the highest price of $69,000 but later on started to decline, and while reaching towards the end of the year, the price stood at $42,000. Bitcoin prices fell further to the $40,000 mark as the year began, alarming cryptocurrency investors. Even though the prices are increasing, the cryptocurrency market is in unrest. It is essential to note that the forecast in the cryptocurrency market says that the price index of cryptocurrencies will be rising by 7% soon. The most prominent and educated cryptocurrency investors ask if bitcoin was not supposed to act as a hedge against inflation. They are also curious to know if bitcoin can act as a place to put their money and get a price rise when the traditional assets are losing their money.
Well, these assets are hazardous. The recent sell-off by the prominently known cryptocurrency investors worldwide is a significant matter of concern in this situation. Bitcoin and other cryptocurrencies are also experiencing a sell-off in the market. As a result, the prices for all of them are falling. In the words of the chief investment officer of a cryptocurrency exchange, crypto is a riskier asset. The recent sell-off in the prices is just a reminder of the same.
As per the experts ‘ knowledge, some features of risky assets are given here.
- The assets that contain high-risk factors also experience a decline in their prices when the economy appears to be going downwards. However, BTC is believed to hedge against inflation but still does not act the same. According to the co-founder of bitcoin IRA, the sentiments of the uncertainty in the markets are because of inflation. Another reason for the same is the recent actions of the Federal Reserve. Also, Federal Reserve has experienced a decline in their income and therefore has raised the interest rates by 4%. Go to the website to learn more about bitcoin.
- It is also essential to note that the shifting of the Federal Reserve recently to a hawkish stance could be an important reason why cryptocurrency investors are bent on selling their assets. Besides all of this, 2021 was an excellent year for the cryptocurrencies like bitcoin. In 2021, the prices increased by almost 400% and therefore, people believed that cryptocurrencies are incredible investment options, but that is not entirely true. Unfortunately, the worst is yet to come is no moment of joy and celebration for the crypto investors.
After reading all this, it is evident that bitcoin is not precisely a hedge against the rising inflation in every corner of the world. Also, the idea of making bitcoin hedging against inflation is purely speculative.
We can never be sure if it will be a perfect option to replace the ever-existing United States dollar and other traditional currencies. Moreover, even though bitcoin can become a hedge against inflation, speculative actions and price movements need to be controlled. When the prices fluctuate like the stock market, there is always more room for massive losses with the investors.
This post was published on February 14, 2022 6:21 pm