- Bitcoin was born out of an economic crisis and it seems that a new crisis is the one that is boosting its value.
- The growth of Bitcoin can be explained, at least in part, to the fact that crypto is recognized by the world as a hedge against inflation.
Yesterday the Bureau of Labor Statistics revealed that US consumer prices grew last month at a faster rate than they did 30 years ago.
The news was the booster that Bitcoin needed to touch $ 69 thousand dollars. What is happening?
Financial crisis origin of Bitcoin
The 2008 global financial crisis broke out 13 years ago, as a result of the collapse of the housing bubble in the United States. Although it was in 2006 when the bubble burst, it was not until 2008 that the consequences began to be seen with concern.
It is so for February 2008 Reuters reported that inflation around the world had risen to historic levels. Later, in 2009, the situation changed and now the problem was deflation, leading, for example, to the United States Federal Reserve setting the interest rate at practically 0%.
The crisis affected various levels of the economy and, in fact, For 2011, the International Labor Organization reported that a record high had been reached in the unemployment rate worldwide. Out of the crisis emerged one of the most brilliant ideas in contemporary history: Bitcoin.
On October 31, 2008 Satoshi Nakamoto published an article titled “Bitcoin: A Peer-to-Peer Electronic Cash System”; The idea was simple, but revolutionary, it was time to cut out the middlemen and achieve financial freedom.
“What is needed is an electronic payment system based on cryptographic evidence rather than trust, allowing two interested parties to transact directly without the need for a trusted third party.”, explained Nakamoto.
Since then Bitcoin has gained traction in the world as the default choice for those who recognize the problem inherent in the traditional financial system. Especially as the conditions that gave it life are reproducing once again, 30 years later.
Crisis, driver of Bitcoin
Yesterday the leading crypto experienced a rise of up to 1.9% to $ 68,991 thousand dollars, surpassing its all-time high that it had barely set on Monday.
Undoubtedly, the increase in the price of Bitcoin can be explained, at least in part, because crypto is recognized by the world as a hedge against inflation.
In general, long-term inflationary concerns are spreading rapidly and all the indicators of the economy are beginning to attract attention.
Yesterday the US government revealed that US consumer inflation rose 0.9% last month; this number exceeded the forecast for a monthly increase of 0.6%. Therefore, the monthly increase has changed the pace of inflation to 6.2% in October from 5.4% in the previous month. This is an excess compared to the Federal Reserve’s 2% annual target. In fact, it represents the highest annualized rate since November 1990.
With this, the pressure on the Fed to raise interest rates intensifies. However, according to the Fed, the increase in prices is “transitory”, but the indicators have cast doubts on investors about that assumption.
The problem is not limited to the United States. China also reported that its factory prices rose 13.5% in October, a high since 1996.
Investors take refuge in Bitcoin
This is how there are more and more world investors who distrust the ability of “leaders” of the world financial system to control the economic context. Therefore, They put their trust in cryptocurrencies, especially Bitcoin.
According CNBC, Edward Moya, Senior Market Analyst at Oanda, assured that many investors are beginning to think that we could be seeing a policy error from the FED, “and that is making many people nervous.”
In fact, investing in Bitcoin is not limited to retail investors; various actors on Wall Street have made their interest in crypto clear and some have even invested in it.
“Wall Street is quickly realizing that inflation is not fading just yet and that demand for inflation hedges will remain strong through the end of the year.”, Wrote Moya, according to CoinDesk.
Why Bitcoin and not Gold?
Probably the most repeated question is: If there are inflationary concerns, why not invest in gold, a metal that has a long history as a hedge?
The increase in interest in Bitcoin does not mean that there are not investors who are hedging against inflation in gold. However, what is true is that precious metal has underperformed in recent months while Bitcoin is on the rise.
“Lhe correlation between gold and BTC has been negative since the summer, but started to rise at the beginning of the month as macro investors accelerated their portfolio adjustment for a more inflationary environment”Wrote a Genesis analyst, according to MarketWatch.
As a result of this increased demand for Bitcoin as an inflation hedge, Glassnode revealed that the supply of Bitcoin on crypto exchanges continues to decline. Specifically, it has fallen to multi-year lows to 12.9% of current supply.
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