Bitcoin has long been touted as an inflationary hedge. Proponents argue that government-issued fiat currencies decrease in value over time due to money printing by central banks. But Bitcoin doesn’t suffer the same devaluation as supply is fixed at 21 million tokens.
However, now that inflation is here and making its presence felt, BTC has, so far, failed to live up to expectations.
In April, data compiled by Bloomberg showed the correlation between the S&P 500 and Bitcoin is the highest it has ever been. Indeed, since the beginning of the health crisis, the two have been moving in unison.
A recent Bank of America report echoed this view. Analysts Alkesh Shah and Andrew Moss said recent Fed rate rises to combat inflation have led to drops in Bitcoin’s value, alongside stocks.
Based on this, it seems that the dollar remains king in times of crisis. But is it as cut and dry as that?
Money printing is out of control
The US Consumer Price Index for April fell 0.2% from the previous month but remains close to record 40-year highs at 8.3%. It’s much the same in the UK, with the latest government figure at 9%.
In response, UK Chancellor Rishi Sunak sought to blame the issue on “global challenges,” adding that the government will provide “significant support where we can” to combat the cost of living crisis.
“We cannot protect people completely from these global challenges but are providing significant support where we can, and stand ready to take further action.”
Global challenges refer to the ongoing effects of the health crisis, the war in Eastern Europe, and the supply chain breakdown. But no politician has spoken about the primary cause of inflation – money printing, which is entirely under central banks’ control.
Although it’s been widely publicized that central banks have printed like crazy since the beginning of the health crisis, the chart below of the Fed M1 money supply illustrates the scale of the problem.
“M1 is the money supply that is composed of…
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