Topic: Bitcoin doesn't like high inflation either (Read 391 times)

The Dow Jones Is More Volatile Than Bitcoin, Data Shows

https://coinculture.com/au/markets/dow-jones-is-more-volatile-than-bitcoin-data-show/

I knw I had one of these opened, and what  a surprise again,

Bitcoin Sinks After US CPI Report Shows Inflation Hotter Than Expected


The moment the inflation prediction was missed by 0.1% BTC again tumbled 3% in a flash.

Lucky for us seems like Bitcoin has become so correlated to the stock market it follows it in every step, just after the plunge all the markets rallied on the premise of FED reaching the peak of their intervention, DJI by 2.2%, SP500 by 1.9%, and Bitcoin also came back to the previous day values, recovering almost 4%.

During the high inflation time bitcoin loved it, its the recession that it doesn't like. The high inflation started a bit ago, and during when it first started (when nations started to print money and give it away) the price of bitcoin went high like crazy and thats when we reached our ATH price. However, with the recession and high interest rates to value fiat a bit more, governments convinced people to pull that money out of the markets and into banks, which cuased the price decrease in bitcoin. So bitcoin overall likes, even loves high inflation, what follows after that is not really something we like here.

Which is weird because there were many preachers around here who claimed that Bitcoin was meant to be the savior, that the fact it could not be inflated due to it's inherent structure was one of it's most powerful attributes. Surely it should be booming right now, when the world is looking so dire with inflation everywhere? Well it seems that the underlying fundamentals of Bitcoin are directly attached to the wider economy, all that cheap money that was flooding the market in previous years found its way in and because it is in reality a high risk non-productive asset, it was always bound to be one of the first to collapse in value especially compared to ownership of companies in the stock market.

Sure. Inflation might have had stayed steady, and still have profit, but that's not my point. My point is: Regardless of the direct responses to the inflation rate, has it managed to retain its value, hereby be a hedge against inflation for the last 2 and half years? Yes. It doesn't have to act against inflation rises in the short term, to be called an inflation hedge, as long as demand rises in the long term.

Granted. It's psychology, I guess. But, I don't blame them, if their plan isn't to get some quick profit within a year or two. We all know the chart. It can lose 10-15% overnight. But, apparently, the long-term hasn't disappointed anyone so far.

We didn't have high inflation back in 2018-2019 or 2014-2015... correlation does not imply causation.

It's called a bear market and it happens in every 4-year cycle (according to halvings). 2013, 2017, 2021... this is a constant pattern.

People will discuss the same things over and over again in 2026 (when a new bear market will probably happen, 1 year after the 2025 ATH).

BTC might reach 1 million USD and then it might also drop down to 200-300k. Yeah, it's not a great inflation hedge if you bought close to the ATH. But it will be a great inflation hedge for those who bought at 5 digits (even 69k).

Rinse & repeat. These discussions never end.

Common, why do you start the counting with the inflation at low levels when I said that at lower levels it grows and it doesn't like that much higher inflation rate? If making a comparison you should start when inflation started to rise, right?



Whoever bought in March 2020, when inflation was low could have still sold while inflation was still low in 2.6% in March 2021, and made a 600% profit. But, who anticipated high inflation coming and bought in March, or April 2021 when inflation went to 2.6 and 4.2%, bought at 60k and is looking now at 20k.

So, the growth happened during inflation of 1.4-2.6%, while during inflation of 4.2-8.3% we went down 3x times.

Again, maybe I need to underline a thing again, I don't think that long-term Bitcoin would lose value because of high inflation, my point is that both adoption, usage, and even price will grow far faster when there is no threat of high inflation or economic recession, not that Bitcoin is useless against inflation.

I see a lot of people (not you) getting triggered by this fact, and there is some kind of consensus against them that if we run into a situation where the price of bread doubles between you and the customer in front of you somehow magically everyone will rush their truckloads full of banknotes to buy coins, every unemployed person will stop at the Batm to invest and not at the soup kitchen and stuff like this.

I don't think it does. Some people buy and don't sell. Some others just sell the same year they bought it. The long-term rise comes from the former.

Nah. Just weak hands. Everyone knows Bitcoin's chart.

As I said, they do affect the short term. What's so wrong about this? Panic selling affects the short term, because panic doesn't last long enough.

Maybe. But, I bet against.

And how does it act against inflation since Covid? Let's take the numbers: https://www.usinflationcalculator.com/inflation/current-inflation-rates/. The annual inflation rate of 2020 was 1.4%, and of 2021, 7%. In 2022, so far, it's 8.3%. If you were right, whoever bought in March 2020 (which was when Covid begun), should have negative capital appreciation. But, that's just not true, it has climbed by +300%.

Seriously, let's stop with those weak hands.
Where the hell did they manage to get their coins to sell in the first place?
Did they just buy them, then it means the rise was also due to the same weak hands, which, you know, sounds weird.
Did they hold from 50k, 40k, you can't label those hands as weak anymore, more like an intermediate level.
Do you mean weak hands had enough coins to drop the market by 10% with every strong hand yelling cheap coins? Not sounding very "weak'" to me!

Common, 10 years and we're still talking about weak hands it's like we will be still blaming witches for drought.
Bitcoin has become somewhat of a global asset, not fully integrated but still widespread enough to be affected the same way stocks are, the same way gold and oil price are, nothing wrong with it nothing exceptionally good from it either, it's just is what it is.


Hmm, it is just me or the weak hands are a bit tougher than all the others right now? 
A hedge against inflation is not decided by who is backing it, it's decided by the way it acts against inflation, and as you can see, weak hands or corporations, drug lords or investors, collectors or gamblers, the direction is the other way around at the moment and my feeling is that we won't be out of this crappy bear market till the whole economy on a global scale shows signs of improvement, which obviously comes with a lower inflation rate.

For the reasons you mentioned. Weak hands sell, because their bitcoin property is suddenly seen as a luxury. That doesn't make bitcoin susceptible to inflation in the long term, and again, history confirms it. It's not weak hands that make it a hedge against inflation. It's legitimate moneyed users, organizations, and corporations. Weak hands only affect the short term.

You've chosen a touchy subject. Not my fault. You say that it doesn't like high inflation, I say: Yes, but only in the short term.

Buying BTC at 50-60k wasn't a good idea, despite money being cheap and inflation low.

Buying BTC at 20k is a far better idea for future gains, despite money being more scarce and inflation high.

I speak from experience, since I tend to buy higher amounts of BTC during crisis (March 2020 for example).

Hmmm, why do I suspect we have a 2nd "franky1" here?  

I completely agree with your assumption and it is not just an assumption but it is reality.

Bitcoin is not a get-rich-quick scheme, but some people can have the wrong perception about it that they think bitcoin investing is the best way to get rich quick. Then, fiat will also be worse off in the future as it loses its value. People are starting to have other payment options that will be alternatives, and if they agree with bitcoin then they will also choose bitcoin as a store of value.

If history has shown us something, can you please elaborate on the reasons why when inflation grows beyond what's expected the same moment the price drops while when inflation unexpectedly cools down more than predicted it jumps?
Because that's exactly what happened three times in a row for now, within minutes and in two cases breaking a continuous trend.
Second, you claim that history has shown us, in what part of Bitcoin history has inflation gone up by more than 3% for more than one quarter?


Well, since I would guess a number of us close to 99% on this board agree that bitcoin will obviously increase in price we should stop talking about anything cause, so what, we know the outcome already!

My point is very simple to understand:
- high inflation, people are forced to cut expenses, to save money, they stop thinking of investment, bitcoin grows slowly
- low inflation, economic growth, people have money, they have the resources and the mindset to invest, bitcoin grows faster

Without knowing what you've previously said, I'm trying to acknowledge: What's your point? That bitcoin price moves analogously to US inflation? Apparently, it doesn't. History has shown it. It's an inflation hedge. Lots of assets do have the same position in the long term, but not necessarily in the short term. Inflation rose, traders acted against the status quo (which is apparently the way trading works?). So what?

Let's see, inflation rose by 0.1% instead of going down by 0.1% as "experts" predicted.
Bitcoin...



But hey, these things happening three times in a row with just a few minutes apart from the release of the data and the price crash are obviously not related, just as obviously I'm not sarcastic here.

Could really do with one of those "super bearish" CPI announcements for price to pump +20% again like it did in July right about now  


I guess "bullish" CPI numbers could also be good for Bitcoin for another 18% to the upside like in late July, just not quite as impressive.

Maybe just any announcement that's bullish or bearish would help prices increase 18%-20%  

Are you kidding me??? Inflation is the bane now. It affects every aspect of the financial market most in 2022. Bitcoin is an asset, it is important we decipher what asset class it is. And as for the present dispensation, Bitcoin is a risk-on asset and inflation mostly affects it, though we might let the future further judge this yet inflation has the most influence on it.

I completely agree with you. Bitcoin had the history of the safe-haven market class in the beginning, but it is mostly classified as a risk-on market now due to the present reality as inflation affects it negatively. More time is needed to actually know what asset class it truly belongs to.

This old narrative might still be present to a few novices but is no more feasible. See, Bitcoin cannot function in isolation, it needs adoption, and its decentralization stance will not even allow it to function in isolation. Inasmuch as some governments and cooperate bodies that understand investment environments are now holding and trading Bitcoin, then the former view has been hijacked.

It is normal that bitcoin would be impacted the same way everything else is impacted. We can't really understand bitcoin unless we understand the human psychology because it is all based on it. If you understand that people are afraid of something, they will withdraw cash. Whenever there is a problem in a nation, you will see people flocking to ATM's and withdraw their money from banks, because they are afraid that their money will be withheld, and bitcoin turning into fiat is 99% of the time done via banks.

So as long as we can't spend bitcoin directly, anytime something bad happens, people will withdraw it to cash as well, but may not do that if we can turn bitcoin into something we can spend everywhere.

Is that the same to those who said that covid 19 and wars is good for btc? Because, they believe it did affected its price in a positive way because of how it worked like people are forced to stay at home and governments are requesting for a donation in the form of btc and other cryptos. They only think about the price but they forget its negative effects to the society.

It is possible for btc become a hedge against inflation because of its unique characteristics but for it to replace fiats and banks? No I don't think so. These narratives are only two of the many that bitcoin circles are using in order to motivate themselves and the others.