By Landon Manning
With the world’s reserve currency, the US dollar, seeing a dramatic spike in inflation, Bitcoin (BTC) recently soared to its highest ever value, showing how it can offer a radical alternative to the world of traditional finance.
Over the course of fiscal year 2021, several trends contributed to the stability of the US dollar, with a steady increase from the first quarter and further increasing momentum over the months. Reuters identified several key metrics on the state of this dollar inflation, claiming that not only is this inflation higher than it will be in 16 months, but the actual rate of inflation this year has not been seen in the US dollar in more than 30 years.
With the ongoing onslaught of the COVID-19 pandemic, which is causing major problems for the global supply chain, affecting food and gasoline prices, and the availability of many everyday consumer goods, several fundamental aspects of the US economy have been affected.
It should therefore come as little surprise that the dwindling trust of this older monetary system has been a boon to the radically decentralized new vision that Bitcoin and other cryptocurrencies have promised. Bitcoin’s price started rising steadily towards the end of 2020, but the price hit a new all-time high in early 2021 and has remained relatively constant since then. On Wednesday November 10th, Bitcoin hit another brief spike, breaking a new price record of $ 69,000 before falling back to around $ 65,000.
This data lends credibility to the 2021 predictions made by JPMorgan Chase analysts, who compared how the valuation of Bitcoin has changed dramatically relative to the valuation of gold, which has been viewed as a permanent store of value for centuries. The data shows that more and more consumers are turning to Bitcoin as a hedge against inflation rather than gold, which provides evidence of greater public confidence in the cryptocurrency.
These claims are also supported by new data, as shown by CNBC in a November 10 report. Although gold experienced a remarkable surge in the week before Bitcoin peaked, this surge was not only temporary, but what is also critical is that even this new surge has not been able to reach the level that Bitcoin at the same time Timeframe, let alone what it’s been seeing constant for months.
The next steps for Bitcoin are a little difficult to predict. During this period, price movements have occurred in several other “inflation hedges”, such as Ether, which is widely regarded as the second most important crypto asset. But here, too, the success of Bitcoin has displaced other cryptocurrencies.
Meanwhile, none of the underlying trends in the US economy that caused this inflation have been significantly addressed. So if this trend is to pick up, it seems logical to assume that Bitcoin will see more price highs in the near future.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.