After inflation data strengthened the notion that bitcoin is a hedge against rising cost pressures, Bitcoin hit another record high and is flirting with $69,000 for the first time.
On Wednesday, the most valuable digital asset surged 1.9 percent to $68,991, surpassing the previous high set late Monday in New York trade. Other cryptocurrencies soared as well, with the Bloomberg Galaxy Crypto Index, which measures key cryptocurrencies, climbing as high as 2.4 percent to its highest level since May.
The emergence of the token can be explained, at least in part, by the core premise that Bitcoin can operate as an inflation hedge, which has gained support in recent months. Crypto supporters believe that, unlike dollars or any other traditional currency, the digital coin is meant to have a finite quantity, making it impossible for a government or central bank to devalue it by issuing too much of it.
“Bitcoin’s surge, which began in August and increased through September and October, is still going strong “Sui Chung, CEO of CF Benchmarks, a cryptocurrency benchmarks administrator, said as much. The most recent leg of the rally began in anticipation of the October launch of a Bitcoin-futures ETF, but “now appears to be propelled by the prolonged inflation that we are witnessing across all of the world’s major economies.””
Prices for everything from food to gasoline to housing have risen quicker and remained more stable in recent months than many experts had predicted. Consumer prices in the United States climbed at the quickest annual rate since 1990 last month, solidifying high inflation as a characteristic of the current recovery and reducing buying power despite rising incomes.
Because of the inflationary-hedge concept, major Wall Street heavyweights have indicated they’ve bought the coin — or are intrigued in it. The fact that gold, which is traditionally thought of as an inflation hedge, has underperformed in recent months while Bitcoin has surged has helped their case.
Others contend that it doesn’t have enough of a track record to prove it can operate as an inflation hedge. Cam Harvey of Duke University has previously made this point, claiming that if investors come to appreciate Bitcoin in the same way they regard gold, it may keep its value for a century or more. In his studies on gold, he discovered that its value has remained stable over millennia. However, he discovered that it is prone to manias and crashes over short periods of time.
Many investors are looking at it as an inflation hedge, according to Matt Maley, chief market strategist for Miller Tabak & Co., but he isn’t confident it will work out well.
“I’m not saying it won’t,” he continued, “but I believe gold has functioned as an inflation hedge for ages, and people should utilise gold and Bitcoin as a hedge.”
According to Bloomberg data, the spot price of gold has declined 1.8 percent this year, while Bitcoin has increased by more than 130 percent.
“People are looking for safe havens for their money,” says the author “JJ Kinahan, TD Ameritrade’s chief market analyst, remarked over the phone. “It’s impossible to determine if it’s an inflation hedge or not since we haven’t experienced inflation with cryptocurrencies,” he added. It’s one of those things that everyone believes will happen, but only time will tell.”