The price hike made headlines around the world. Because of the dam in the United States, inflation recently broke the 40-year record. The situation in Europe is serious: prices have risen by more than 5% in the eurozone and 4.9% in the UK.
While prices are rising, Bitcoin (BTC) remains at around $39,000. This raises several questions: Is Bitcoin an effective hedge against price increases, what role can Bitcoin play in a hyperinflationary environment, and was Bitcoin aware of upcoming inflation?
Experts from the world of bitcoin, finance and even European politics answered these questions and shared their views on the alarming price increases in Europe with Cointelegraph.
According to analysts’ monthly Kaiko report, the price of bitcoin has been outpacing inflation, indicating that bitcoin may have been anticipating price increases and making efforts to hedge against inflation.
Danny Scott, CEO of leading UK bitcoin exchange CoinCorner, echoes this argument. He was not “surprised by the inflation rates that we see around the world.”
“This has been in development for the better part of a decade and COVID has accelerated this. Real inflation has been swept under the rug to maintain a positive outlook on how to ‘control’ inflation.
Another bitcoin, MP this time, is once again “not surprised” by rising inflation. Belgium’s central opinion leader Christophe de Böckeler was the first European politician to be paid in bitcoin.
“When we get into the trillions, as we did, at some point you’re going to have to foot the bill,” he told Cointelegraph. But this not only causes economic damage, “people do not see it and do not realize it, but inflation has a huge impact on their well-being.”
Nicholas Bertrand, Ambassador of the Global Blockchain Business Council and Chief Financial Officer of the Italian Stock Exchange and the London Stock Exchange, told Cointelegraph:
“Expansionary monetary policy is driving higher inflation and I wouldn’t be surprised if this situation continues for longer than people expect.”
However, de Bockeler believes that “at some point we will face a serious monetary crisis”.
Now that the crisis in Ukraine has exacerbated the problem, what does this mean for short-term inflation? “Rising commodity prices are likely to maintain strong inflationary pressures and dampen growth due to Europe’s strong economic ties with Russia,” Kaiko analyst Deslava Uber told Cointelegraph.
She added that the current price action, with bitcoin dropping from a high of $69,000, is likely due to “markets pricing in rate hikes by the European Central Bank this year.”
Inflation Is Going Nowhere, Is HODL Bitcoin Worth It?
Bitcoin as an inflation hedge is a popular narrative in the United States. In Europe, there is no jury, or as de Bockeler notes, “it’s hard to say for sure.” However, “since growth is limited and transparent, it is expected to be an effective hedge against inflation.”
For Bertrand, with his rich experience in the ancient financial markets, the situation is clear:
“Unlike fiat currencies, other widely available investment funds, and even gold, the value of Bitcoin cannot be negatively affected by the issuance of new coins. This provides a solid foundation and makes Bitcoin an interesting asset in the context of rising inflation.
However, there are some caveats. “There is not enough data to prove that Bitcoin is a good inflation hedge statistic.” Additionally, Bertrand shared that “we are not yet ready to consider bitcoin a good hedge when it comes to adoption.”
Uber takes a similar view, stating that “Bitcoin has moved in line with risky assets in recent months and is unlikely to navigate the current uncertain monetary environment.”