Some see Bitcoin as the financial Holy Grail, the cure for all monetary ills. For others, it is a dangerous rattle, a speculative bubble ready to burst. In this great debate, Grayscale experts have their say, praising the queen of cryptocurrencies as a shield against galloping inflation and uncontrollable deficits.
Bitcoin: Anti-inflation shield or suspended bubble?
Our central banks are struggling to curb the rise in prices, in vain. The Wall Street Journal reveals annual inflation of 8% since 2019, or 40% for the United States. In this fight against inflation, Bitcoin is patiently biding its time, according to a detailed analysis from our colleague.
According to Zach Pandl of Grayscale, bitcoin remains an oasis of stability in a shifting monetary desert. The Fed, by continuing its excessive spending and maintaining high interest rates, is fueling this hunger for stable assets.
“ Persistent inflation and unsustainable deficits are driving demand for safe havens like bitcoin “, explains Pandl to Cointelegraph.
However, despite this galloping inflation, the Fed seems powerless to lower interest rates. Bitcoin's impending halving or halving, economic recovery and growing adoption of cryptocurrencies promise continued growth in its price.
Inflation in March disappointed, rising 0.4% month-on-month and 3.5% year-on-year. This persistence of high rates puts the Fed in a bind, according to Pandl's comments.
Greg Daco, chief economist at Ernst & Young, highlights the increasing pressure on political decision-makers to maintain a rigorous monetary policy. But Pandl remains confident: a rise in real interest rates could slow down cryptos in the short term, but demand for safe haven assets will persist in the long term.
The tricky equation: Volatility vs. stability
In a market where every movement counts, investors are scrutinizing the figures with feverishness. A significant increase in the 10-year real interest rate, reaching 1.934%, could well be the long-awaited signal. Less volatile assets, such as bonds and fixed deposits, present themselves as havens of stability.
History only confirms this trend: each surge in the real interest rate preceded a notable fall in the price of bitcoin. Data from the Federal Reserve Bank of St. Louis reveals impressive gains, while BTC fell accordingly.
Today, following the release of the latest CPI data, bitcoin is weakening slightly, following cautious investor sentiment. A new resistance indicator emerges, revealing the delicate equation between volatility and stability in the world of cryptocurrencies.
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