Bitcoin (BTC) rises amid inflation-led US dollar weakening

bitcoin price and inflation both rise
“Bitcoin (BTC) rises amid inflation-led US dollar weakening” ” Image by frankieleon via Flickr
  • Bitcoin resumed its uptrend after correcting to sub-$60,000 prices.
  • Inflation concerns fuelling the top crypto asset’s rally as the US dollar loses strength.
  • Gold prices also rising but Bitcoin topping the inflaiton-hedge rush.

BENGALURU (CoinChapter.com) – Bitcoin experienced renewed buying interest as inflation concerns boosted the demand for ‘inflation hedge’ assets. The US dollar dropped to weekly lows, which triggered a rush of investment in both physical and digital gold. But the latter ruled the roost.

Related: Bitcoin heads towards $60K after U.S. inflation report shows another spike in consumer prices

This Inflation Is Not Transitory

US inflation woes are here to stay. Federal Reserve Chairman Jerome Powell too reiterated concerns pertaining to the looming crisis triggered by rising prices. However, initially, the US central bank chief sang the “inflation is transitory” song.

At the beginning of Q3 2021, Mr. Powell assured that the rising inflation graph was a reflection of the COVID-19 pandemic led-clogged supply-chain channels. But at a virtual conference hosted by the South African Reserve Bank, the Fed boss underwent a tone reversal.

“Supply constraints and elevated inflation are likely to last longer than previously expected and well into next year” 

said Federal Reserve Chairman Jerome Powell

As per the latest data from the Bureau of Labor Statistics, US Department of Labor, Consumer Price Index (CPI) for all consumables, rose to 5.4% in September 2021, a 13-year high. home and food prices, energy, and new vehicle costs mainly contributed to the rising inflation trend.

bitcoin, Bitcoin (BTC) rises amid inflation-led US dollar weakening
12-month percent change in CPI for All Urban Consumers (CPI-U), Source: Bureau of Labor Statistics, US Department of Labor

Related: Crypto market maintains strong footing as US inflation rises another 0.5% in July

CPI rose 0.2% after bouncing up 0.1% in August, excluding the food and energy goods, logging its smallest gain in six months. Hence, rising inflation due to supply-chain bottlenecks and upward correcting commodity prices have persisted.

Consequentially, the majority of officials in the last Federal Open Market Committee (FOMC) voted for a tapering of the $120 billion worth of asset purchases. The Fed would go about the same by reducing the stimulus by $15 billion a month starting mid-November. The purchases would likely conclude by June 2022.

However, benchmark interest rates would remain intact till then, as Mr. Powell expects employment numbers to fare better for the rate hike to commence in earnest.

Bitcoin Is The Inadvertent Benefactor

The Fed’s admission of inflation “not being transitory” and aversion towards an interest rate hike led Bitcoin investors to double down on their inflation-hedge bets. While prices of the top cryptocurrency declined after the ascent to a new high, bullish sentiment resumed as inflation fears gripped market players intensely.

All the more, due to the DXY recording weekly lows, traders swapped the US dollar for Bitcoin. DXY fell from the local top at 94.57 to 93.5 on Monday. As a result, the BTC/USD pair notched up 7% gains, moving up from lows near $59,400 to $63,731. Buying pressures caused both relative strength index (RSI) and moving average convergence divergence (MACD) to switch directions from down to up.

Traditional investors favoring gold as their preferred inflation trade placed buy bets en-masse, which led to the yellow metal reclaiming $1,814. However, Bitcoin beat all ROI records. Morgan Creek Digital Asset fund founder Anthony Pompliano explained explicitly how real estate and gold have been a ‘losing investment’ compared to Bitcoin.

Bitcoin returns versus traditional assets’ returns. Source: Anthony Pompliano
Bitcoin returns versus traditional assets’ returns. Source: Anthony Pompliano

Related: Bitcoin boomed better as inflation hedge than real estate and gold: Pomp

Billionaire hedge fund investment icon, Paul Tudor Jones reiterated Pomp’s Bitcoin being the superior inflation-hedge viewpoint in a recent CNBC interview.

” Clearly there is a place for crypto and clearly it’s winning the race against gold at the moment. I would think that would also be a very good inflation hedge. It would be my preferred one over gold at the moment.”

said Paul Tudor Jones

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