Bitcoin abandons its role of hedge against inflation and falls towards $30,000

Bitcoin maintains its negative tone this Wednesday after chaining two days of falls that have seen the digital asset approach the low part of its trading range, at $30,000, after the US inflation report that showed how consumer prices were they rose to their thirteen-year high. However, buyers have once again taken advantage of the falls to buy the most traded of digital currencies and the price hovers above $31,000. Ethereum has still suffered a further decline, changing hands below $1,900 and the total capitalization barely exceeding $1.3 trillion.

The aversion to risky assets has weighed on investors in digital currencies and not even rumors that Apple has bought more than 2 billion dollars in bitcoins have encouraged the price. The lack of a credible source caused the rebound caused by this news to fade and sales eventually prevailed.

The largest cryptocurrency is seen by many investors in digital assets as a hedge against inflation, so the price reaction left analysts puzzled. "Interestingly, while CPI inflation has risen from + 1.4% annually in January to 5.4% in June, bitcoin has essentially halved," tweeted Liz Ann Sonders, chief investment strategist at Charles Schwab.

"Bitcoin no longer behaves as a hedge against inflation," says Edward Moya, an analyst at Oanda, "and will continue to weigh on expectations of higher returns." "However, it can be argued that this will be transitory and given the flattening of the US Treasury curve, the inflation shock might not be a strong enough catalyst to break the cryptocurrency's recent trading range." . "The $30,000 level should still hold for bitcoin."

Looking at the broader macroeconomic picture, bitcoin price developments are put into perspective: bitcoin prices quadrupled last year when the US Federal Reserve injected trillions of newly printed dollars into financial markets, almost doubling by a year the amount of money you had created in the previous 107 years.

But the bitcoin market's reaction to higher-than-expected inflation could also reflect the nature of financial markets, where macro releases matter far less than what the Federal Reserve might do in response to them. In this case, many economists say the pace of inflation still appears to be "transitory," as Fed Chairman Jerome Powell has put it. All in all, the world's largest central bank is expected to reduce its stimulus as late as September.

Translated by Caoimhe Toman