Well then, why didn’t bitcoin’s price rocket up after the inflation print came out last week? Is bitcoin a bad inflation hedge? Is it ever going to be a store of value? For all its promise, Bitcoin’s sound money properties should predispose it toward being a useful inflation hedge and store of value.
There’s not enough room in a column to dive into the gory details of all of these concepts, but let’s zoom in on money, expectations and the entity responsible for those two in the U.S., the Federal Reserve, and tie it into recent inflation woes .
The Fed has been given responsibility for monetary policy in the U.S.
“Stable prices” is a goal for the Fed, and that has historically meant an arbitrary 2% target for inflation each year, meaning the Fed wants things to cost 2% more each year.
On a 60-day lookback, bitcoin’s price has been somewhat correlated (> 0.20 correlation coefficient) with the technology stocks in the Nasdaq for about 50% of trading days in 2022.
Yes, a borderless, permissionless, uncensorable, sound monetary system-of-value transfer with a predictable monetary policy is theoretically a great store of value, but until that narrative penetrates more than 100 million people, the other 7.8 billion people won’t view that system as a store of value, and that narrative will prevail.
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During a shortened week in traditional markets, with U.S.
stock exchanges closed on Friday, bitcoin struggled for direction, hovering around $40K, while DOGE and SHIB experienced wild swings.
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