The price of Bitcoin rose to a new all-time high of $69,044.77 Wednesday morning within minutes of the Labor Department’s monthly consumer price index report. The report showed consumer prices rose 6.2 percent in October on a yearly basis — the fastest pace in 30 years — and exceeded economists’ expectations.
An increasing number of investors see the No. 1 cryptocurrency as digital gold and a hedge against inflation. Bitcoin’s price has risen in recent weeks along with fears of rising costs of consumer goods and services, leading investors to find alternatives that hold up better than cash or bonds, which often pay out a fixed amount.
In addition to Bitcoin’s $2,500 (4-percent) gain within about 45 minutes, the price of Ether rose by 1.9 percent to $4,878. Spot gold climbed 1.3 percent and silver spiked by more than 3 percent. Inflation-protected Treasury bonds also surged, CNBC reported.
Federal Reserve officials and some economists argued earlier in 2021 that they expected inflation to be “transitory,” not long term, but traders are betting the central bank will raise interest rates in 2022. Supply chain issues related to the pandemic continue to cause inflation such as high prices for new and used cars. However, inflation has spread to other areas of the economy including food, shelter and energy.
Inflation went into overdrive in October, pushing up U.S. consumer prices by 6.2 percent compared to a year ago in the fastest annual increase since 1990, according to Labor Department statistics.
Despite the volatility of Bitcoin, it has a market value of more than $1.295 trillion, accounting for about 42 percent of the total cryptocurrency market value. Investors are buying it as an alternative to the traditional inflation hedge — gold — and as bond yields fall.
“Inflation is a major consideration for investors today, and the younger generation of investors often favors cryptocurrency as a hedge over gold,” said Wilfred Daye, head of the trading platform Securitize Capital, in The Guardian. “In fact, while gold has slid throughout the year, Bitcoin and Ethereum have more than doubled. Retail investors have played a major role in fuelling this shift and institutional investors are increasingly following suit.”
The largest U.S. investment bank, JPMorgan, recently repeated its prediction of January 2021 that Bitcoin could go as high as $146,000 and is acting like digital gold.
Jack Dorsey, CEO of Twitter and the payments company Square, said during a Nov. 4 conference call that he was committed to making Bitcoin “the native currency of the internet” and his company had no plans to offer other cryptocurrencies besides Bitcoin.
Many investors bought into Bitcoin during the pandemic “as a legitimate hedge against longer-term inflation concerns, which have come to the fore as massive levels of government spending threaten the U.S. dollar’s strength,” Forbes reported.
“These emergency measures, like the massive money-printing agenda, reduce the value of traditional currencies like the dollar,” said Nigel Green, the CEO of wealth advisory deVere Group, in a recent note.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?