July 13, 2022

This is what everyone misses about bitcoin and inflation

“If bitcoin is such a great inflation hedge, why has the price not responded to record high inflation?” Let us explain.

Joe Lupo
Joe Lupo

Reserve Client Manager

This is what everyone misses about bitcoin and inflation

Table of contents

This is what everyone misses about bitcoin and inflation

“If bitcoin is such a great inflation hedge, why has the price not responded to record high inflation?”

Good question.

Let's begin here: Bitcoin offers long term protection against inflation.

While bitcoin has proven to be an incredibly effective hedge against dollar debasement over long periods of time, we shouldn't expect to see the price respond immediately to a high CPI print.

Here's Why

High inflation data signals to the market that the Federal Reserve is more likely to raise interest rates. A rate hike would make dollars more valuable in the near future – that's the point. So, investors who expect this to happen sell assets that are deemed risky and carry more cash. This is a rational short term response.

While we know bitcoin is far superior to any other form of money, it is still a new asset. That's why investors consider it higher risk, and why it's still correlated with legacy risk assets.

As bitcoin matures, volatility in its purchasing power will subside and it will begin to decouple from the rest of the market.

Value investing with bitcoin

Most importantly, bitcoin outperforms most other asset classes in periods of low volatility. It is during these periods when bitcoin's value as a long-term hedge against dollar debasement (i.e., inflation) comes into play.

Over its history, assuming a longer time period, bitcoin has offered strong protection against inflation. As dollars become more abundant, bitcoin becomes more scarce. This is because bitcoin's supply cannot respond to increased demand.

What you can do

Be fearful when others are greedy and greedy only when others are fearful   – Warren Buffet

To understand the inherent value of bitcoin, it's a mistake to focus on price. Instead, look at its fundamentals, such as its extraordinarily stable monetary policy, the growth rate of full nodes, and the network's hash rate. All of these are stronger than ever.

Focusing on the right things helps you block out the noise. While fiat investors allow themselves to be distracted by irrelevant data, those who get bitcoin move in and capitalize on its low price.

Taking advantage of temporary dips is a profitable strategy. There are many ways to buy bitcoin, but our way is the best – we designed it to be as fast, easy, and inexpensive as possible. So head to Coinbits and grab some sats while the sale is on!

February 24, 2022

This is what everyone misses about bitcoin and inflation

“If bitcoin is such a great inflation hedge, why has the price not responded to record high inflation?” Let us explain.

Joe Lupo
Joe Lupo

Investor Relations

This is what everyone misses about bitcoin and inflation

“If bitcoin is such a great inflation hedge, why has the price not responded to record high inflation?”

Good question.

Let's begin here: Bitcoin offers long term protection against inflation.

While bitcoin has proven to be an incredibly effective hedge against dollar debasement over long periods of time, we shouldn't expect to see the price respond immediately to a high CPI print.

Here's Why

High inflation data signals to the market that the Federal Reserve is more likely to raise interest rates. A rate hike would make dollars more valuable in the near future – that's the point. So, investors who expect this to happen sell assets that are deemed risky and carry more cash. This is a rational short term response.

While we know bitcoin is far superior to any other form of money, it is still a new asset. That's why investors consider it higher risk, and why it's still correlated with legacy risk assets.

As bitcoin matures, volatility in its purchasing power will subside and it will begin to decouple from the rest of the market.

Value investing with bitcoin

Most importantly, bitcoin outperforms most other asset classes in periods of low volatility. It is during these periods when bitcoin's value as a long-term hedge against dollar debasement (i.e., inflation) comes into play.

Over its history, assuming a longer time period, bitcoin has offered strong protection against inflation. As dollars become more abundant, bitcoin becomes more scarce. This is because bitcoin's supply cannot respond to increased demand.

What you can do

Be fearful when others are greedy and greedy only when others are fearful   – Warren Buffet

To understand the inherent value of bitcoin, it's a mistake to focus on price. Instead, look at its fundamentals, such as its extraordinarily stable monetary policy, the growth rate of full nodes, and the network's hash rate. All of these are stronger than ever.

Focusing on the right things helps you block out the noise. While fiat investors allow themselves to be distracted by irrelevant data, those who get bitcoin move in and capitalize on its low price.

Taking advantage of temporary dips is a profitable strategy. There are many ways to buy bitcoin, but our way is the best – we designed it to be as fast, easy, and inexpensive as possible. So head to Coinbits and grab some sats while the sale is on!