Bitcoin is not inflation protection, says owner of website bitcoin.org

Bitcoin performed poorly for the year and is being reassessed by the market. This week, CNBC and Forbes stated that Bitcoin is not a hedge against inflation. The same was said by Cobra, responsible for the Bitcoin.org website.

In the comments collected by the above portals, some experts cite the asset’s volatility and youthfulness as the main reasons why Bitcoin fails to behave as a safe haven during periods of state currency devaluation.

Others point to the recent correlation with the stock market, which is also declining this year. As such, BTC is still seen by many as a risky asset, not immune to the Federal Reserve’s monetary policy.

Bitcoin, inflation protection

Inflation by definition means the expansion of the monetary base. That is, the printing of money, which consequently leads to an increase in the prices of goods and products.

Considering that Bitcoin has managed to solve this problem through math. In total there will be only 21 million BTC and currently 6.25 BTC is generated per block (~10 minutes), resulting in an inflation rate of 1.7%.

Bitcoin monetary inflation and inflation. Source: plot.

The dollar’s (M2) monetary base is following the opposite path as Bitcoin stabilizes.

Dollar monetary inflation (M2). Source: TradingView.

But even with major currencies like the dollar and euro facing their biggest devaluation spikes in decades, Bitcoin has crashed this year. So even Cobra, heir to the Bitcoin.org domain, no longer believes that BTC is a safe haven.

“The story “Bitcoin is a hedge against inflation” is 100% dead.”

Change in Bitcoin Investor Profile

As a KPMG report shows, the profile of Bitcoin investors has changed a lot in recent years. While the market was dominated by private investors until 2018, today it is dominated by institutions and funds.

As a result, Bitcoin began to behave more like a risky asset than a hedge against inflation.

“The market is still very centralized and controlled by Wall Street hedge funds, and their liquidity hurts us like everyone else.” comments Abraham Piha of Tomi to Forbes. “Right now, the only real advantage is that it’s an asset that no one can confiscate from the owner.”

Andrei Grachev of DWF Labs tells Forbes that “Bitcoin is still seen as a new and volatile asset to be a hedge.” After all, the biggest rival in this area is gold, an asset that for centuries has acted as a store of value against just 13 years of Bitcoin.

There is still no definition for Bitcoin

Since it is a new acquisition, many try to find models to determine its price. Some consider the expansion of the dollar’s monetary base to place Bitcoin as a hedge against inflation, others compare the growth in its adoption to other technologies such as smartphones and the internet itself.

Anyway, the fact is, anyone could be wrong. As highlighted by Anjali Jariwala of Fit Advisors to CNBC, Bitcoin does not fit any given definition.

“It’s complicated because it has to work like a currency, it’s taxed like a commodity and some people compare it to a commodity. Finally, [o Bitcoin] it really is its own asset class that has no clear definition.”

Therefore, the price is ultimately the result of these and other points of view from different investors. Thus, those who see risks from the rise in interest rates by central banks are leaving. Those who believe in Bitcoin scarcity are buying at these levels.

Finally, regardless of how it is viewed, the fact is that Bitcoin proves its worth in every inflation crisis, pandemic and even wars. Therefore, it is difficult to imagine that it loses its strength, on the contrary.

Source: Live Coins

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