Is Bitcoin a hedge against inflation?

By FintechNews staff

-As many already know, the United States Consumer Price Index for October is a red hot 6.2% year-over-year growth, continuing its accelerating trend since May 2020. This is now the fifth month in a row with CPI gains over 5%.

-Federal Reserve Chair Jerome Powell said the central bank’s asset purchases could end sooner than planned amid rising inflation rates and a more robust U.S. economy, reported Bloomberg. As inflation runs rampant, bitcoin comes to the rescue.

–Traditionally, gold has been considered the strongest inflation hedge. However, as inflation has surged over the past year, gold has underperformed. While everything from housing prices to gasoline to energy costs have soared, the price of gold has dropped 1.8% this year, while Bitcoin has gained more than 130% in that span, according to data compiled by Bloomberg.

-Unlike dollars, Bitcoin is designed to have a limited supply. Central banks on the other hand, can create as much money as they wish. Consequently Bitcoin is widely regarded as an inflation hedge

-Nobody really knows for certain how Bitcoin will perform as an inflation hedge over time. Bitcoin is extremely volatile, which could affect its potential as an inflation hedge. There are many factors besides inflation that can impact the price of Bitcoin. While it does seem promising right now, only time will tell whether it continues performing well over the long run.