All over the globe, rising prices are making headlines. Inflation in the United States recently broke the 40-year mark . Europe is facing a severe situation, with prices increasing by more than 5% in the Eurozone and 4.9% within the United Kingdom.
Bitcoin ( Bitcoin) remains flat at $39,000 despite rising prices. This raises many questions. Is Bitcoin an effective way to hedge against rising prices? What role does Bitcoin play in an inflationary environment?
These questions were answered by experts from finance, Bitcoin and European politics. They shared their opinions with Cointelegraph regarding the alarming rise in European prices.
According to Kaiko, data analysts, the Bitcoin price jumped ahead inflation. This suggests that Bitcoiners could have foreseen an increase in prices and stacked bitcoins to protect against it.
This argument is supported by Danny Scott, CEO at CoinCorner in the U.K. He isn’t surprised at the level of inflation we see around the globe.
“This has been in development for over a decade, and COVID just accelerated it. To keep the positive spin on inflation being “under control,” true inflation is being covered up.
Another Bitcoiner, this one a member in parliament, is “not surprised” at the rising inflation rate. Christophe De Beukelaer (Belgian key opinion leader) was the first European politician to receive his salary in Bitcoin.
Cointelegraph was told by him that when we inflate trillions of dollars, as we have, you must pay the bill. But it’s not just a financial burden. “People don’t see it or realize it. Inflation has a significant impact on their well being.”
Nicolas Bertrand is a Global Blockchain Business Council Ambassador and financial executive from Borsa Italia. He also told Cointelegraph:
“Expansive monetary policy is contributing to higher levels inflation and I wouldn’t be surprised to see this situation last for longer than people anticipate.”
De Beukelaer believes that there will be a major monetary crisis at some point.
What does this mean for inflation? Kaiko’s research analyst Desslava Aubert told Cointelegraph that rising commodities prices will likely keep inflationary pressures high and slow growth because of Europe’s strong economic ties with Russia.
She said that the current price action in Bitcoin that has fallen from $69,000 highs is likely due to “markets pricing out a rate increase from the European Central Bank” this year.
You should HODL Bitcoin as inflation is here to stay.
Bitcoin as an inflation hedge is a well-known narrative in the United States. The jury is still out in Europe. De Beukelaer says, “it’s difficult to know with certainty if bitcoin-serves-as an inflation hedge.”
Bertrand’s wealth of experience in legacy financial markets makes it clear that the situation is dire for him:
Bitcoin’s value is not affected by new coins, contrary to fiat currencies and other readily available investment assets like gold. This provides a solid foundation and makes Bitcoin an attractive asset in the context of rising inflation.
There are some caveats. Bertrand said that there isn’t “enough data” to show that Bitcoin is statistically a good way to hedge against inflation.
Aubert shares a similar opinion, explaining that “Bitcoin moved in tandem with other risk assets over the last few months and it is unlikely to decouple under the current uncertain monetary environment.”
Scott and Bendik Norheim Schei (head of research at Arcane Crypto), are focused on Bitcoin’s role in an inflationary world. Schei told Cointelegraph:
“Bitcoin can be a great choice for people who want to place a wager on inflation going crazy. You can hedge against this scenario. If global economies experience extreme inflation, a scarce asset with a stable supply is an alternative.
Scott says that “Bitcoin solves money separation problems, but also offers many benefits such as an inflation hedge in a global and decentralized manner.”
Given the fact that Argentina and other large emerging nations have experienced inflation of 50% or more, people are looking for solutions. He warns that you don’t need Bitcoin unless you use it.
Inflationary future and Bitcoin
While it is still up for debate whether Bitcoin acts as an inflationary hedge or a store-of-value, De Beukelaer says that Bitcoin/crypto is an option. And, that’s positive. The only thing that can make power do stupid things is its own. It is good that there is a monetary counter-power to balance its excesses.
Bertrand believes balance is also important. “As with all things, it is important to carefully consider their consolidated assets allocation and keep the idea of balance in your mind.”
De Beuekalaer says that “purchasing power has been eroded by half in the last ten years” which adds to the pressure. It’s the best time to be smart about Bitcoin.
Scott is concise. Scott is succinct.
Schei is the final word on seminal cryptocurrency.
“This is a long-term investment in an asset that will prosper in a world with large fiat currencies becoming worthless due to uncontrolled money printing, extreme inflation and high prices.”
It might be worth holding onto some Bitcoin as more and more thought leaders, billionaire investors are pledging their support or claiming that fiat currencies are going zero.