Bitcoin at a standstill - Inflation is still running

Bitcoin at a standstill – Inflation is still running

Everything is expensive… except Bitcoin – Whereas in May, we were already deploring the rising inflation rate announced in the United States, this trend is confirmed for the month of June. Indeed, data from the US Bureau of Labor Statistics points to the rising rate of inflation. From 8.6% in May to 9.1% in June: this rate had not been seen for 4 years. All this economic context weighs on the American central bank and makes it aggressive: it wishes to ensure the protection of its cherished dollar.

Inflation under pressure

The report of US Bureau of Labor Statistics published on July 13 is unequivocal. The inflation rate is at its highest ever. The new gridCPI (Consumer Price Index) paces the prices of consumer products, gasoline, energy, etc. These indices allow the calculation of inflation. They are all in the red this month.

The rise in prices then affects purchasing power, which is harmed. It is then usual for the American Central Bank (FED) to increase its lending rate – even if it means causing a period of recession – in order to protect itself from inflation. So when the FED increases its borrowing rates, it then becomes more expensive to consume. As a result, demand for certain products decreases and prices stabilize (they may even decrease at times).

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And bitcoin in all this?

Bitcointhe king of cryptocurrencies is not unscathed in all this. Since October 2021, the beginnings of accelerating inflation, BTC has lost more than two-thirds of its value. As a reminder, BTC was trading at $67,566 around the November 8, 2021at the time of writing these few lines, BTC is trading at $22,104 according to data from Coinmarketcap.

By itself, inflation does not reach Bitcoin. On the other hand, this complex economic context and heavy burden on investors’ wallets. War in Ukraine, energy crisis, Covid-19 are all parameters that tend to immobilize capital in hot places: safe havens. The dollar and gold then offering – a priori – a safer investment.

Coinmarketcap curve of BTC/USD since the creation of Bitcoin.
Price of Bitcoin against the dollar since its creation – Source: Coinmarketcap

Signs of improvement

The results and the data are such that economists believe we are peaking at this rate of inflation. Affinity Solutions, data and statistics company, analyzes consumer behavior. She explains this probable easing of inflation based on his studies. The words of Jonathan Silver, its founder and CEO to our colleagues at CoinDesk underline this idea of ​​an inflation that would calm down:

“There are certainly positive signs that would indicate that the worst is behind us. (…) The job market remains strong, which puts money in people’s pockets. However, price increases are always higher than wages. Hopefully this trend will reverse when inflation peaks and begins to dissipate. Our shopping spend data suggests this is the direction we are headed.”

The monetary policy committee of the Federal Reserve ( Federal Open Market Committee) is due to meet on July 26-27, 2022. Inflation will of course be on the agenda. Monetary tightening, rate increase, Jerome Powell, president of the EDF keep in mind the need for stabilize prices and protect consumers. The price of Bitcoin meanwhile still attracts as many holders who buy the dip (buy in the dip). From salvador at Michael Saylor, for some, the Bitcoin remains a safe haven against to the increase in inflation.

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