Federal Reserve Acknowledges Bitcoin as Superior Hedge against Inflation
Summary:
The Federal Reserve unwittingly acknowledges that Bitcoin (BTC) serves as a stronger inflation hedge than the U.S. dollar, according to an updated June 2022 blog post. The post compares buying eggs with Bitcoin and USD since January 2021 and found a reduced cost with Bitcoin over time. Bitcoin holders required 70% fewer satoshis in purchasing eggs compared to 58% less in dollars by August 2023. Despite this, potential recession warnings and associated risks are noted, alluding to potential shifts in foreign monetary strategies. The report doesn't provide investment advice but emphasizes the necessity for individual research.
In an unwitting confession, the Federal Reserve suggests that Bitcoin (BTC) offers a more promising hedge against inflation than the United States dollar. The revelation came in the form of an updated blog post from June 2022, where the St. Louis Fed used the example of purchasing eggs with BTC and USD, with unexpected outcomes.
Highlighted in the post, despite a common perception of Bitcoin not performing well against the US dollar, Bitcoin holders have been able to purchase eggs for a cheaper price over time. The findings were established by tracking the cost of a dozen eggs in both BTC, denoted in satoshis, and USD from January 2021.
The price varied quite dramatically, with an increase observed in the cost of eggs when measured in satoshis. However, this variation also had to account for a Bitcoin transaction fee, which could occasionally surge above $50. Yet a chart revealed that the number of satoshis needed to buy a dozen eggs has reduced more than the respective amount in dollars since peaking in December 2022.
In terms of the percentage reduction, Bitcoin holders required 70% fewer satoshis to make the purchase by August 2023, while the cost in USD was only down by 58%. A comparison between the price hike from the beginning of 2021 reveals a 39% and 73% increase for USD and BTC respectively.
However, an overall understanding of Bitcoin's performance necessitates a long-term analysis. The cost of eggs has drastically decreased since Bitcoin's last pre-halving year in 2019, contrary to the consistent price surge in the USD during the same period.
As September approaches, all eyes are on the greenback. The U.S. dollar index (DXY) is nearing its peak in a year, causing foreign countries to possibly re-evaluate their monetary strategies. Meanwhile, there are alarming indications suggesting an impending recession in 2024, with Federal Reserve data indicating nearly 60% odds, not to mention spiking bond yields.
This news report doesn't include investment guidance or recommendations. Every investment move entails risk, necessitating independent research for decision making.
Published At
10/5/2023 12:08:37 PM
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