Bitcoin’s limited supply is one of its major attractions for long-term holders seeking alternative investment opportunities in a rapidly changing global economy. As opposed to fiat, which can be printed indefinitely, there can only ever be 21 million BTC, and basic market principles dictate that growing demand coupled with a fixed supply results in price appreciation.

Such supply and demand debates took center stage after the COVID pandemic hastened the demise of numerous existing businesses and practices and supported the creation of new models and opportunities.

Disruption at this scale brings with it some inevitable uncertainties, and investors proactively attempt to counter various risks, even those that may not be clearly foreseeable at the time. 

Hedging against inflation is one such attempt, and as a result, we saw risk assets – such as stocks and crypto – put up record-breaking performances since COVID started spreading.

Further proof of the market treating BTC as an inflation hedge lies in the correlation between Bitcoin price and U.S. monetary policy movements. For example, every time the FED took a dovish stance, we saw stocks and Bitcoin prices rise. Similarly, with each hawkish message, the same risk assets dropped.

The chart below shows these relationships, especially as we consider how the price of BTC, gold and the dollar index react to the FOMC’s latest release on June 16, 2021, that sent out a hawkish message.

It is clear from the price movements that BTC and gold (one of the most common inflation hedges) are responding similarly to the possibility of economic policy contraction in the future. As the US dollar shows strength, gold and BTC show weakness and vice versa.

However, what this analysis shows us is that the market considers BTC a hedge against inflation. It does not tell us whether BTC is a good hedge against inflation or not. But this question is answered by Bitcoin’s returns over the years. In fact, BTC out performed everything in the last decade, and was widely called the best investment of the decade, turning $1 into $90,000.

Disclosure:

As of the publication date of this report, BitBull Capital Management LLC and its affiliates (collectively “BitBull”), others that contributed research to this report and others that we have shared our research with (collectively, the “Investors”) may have long or short positions in and may own options on the token of the project covered herein and stand to realize gains in the event that the price of the token increases or decreases. Following publication of the report, the Investors may transact in the tokens of the project covered herein. All content in this report represent the opinions of BitBull. BitBull has obtained all information herein from sources they believe to be accurate and reliable. However, such information is presented “as is,” without warranty of any kind – whether express or implied.

This document is for informational purposes only and is not intended as an official confirmation of any transaction. All market prices, data and other information are not warranted as to completeness or accuracy, are based upon selected public market data, and reflect prevailing conditions and BitBull’s views as of this date, all of which are accordingly subject to change without notice. BitBull has no obligation to continue offering reports regarding the project. Reports are prepared as of the date(s) indicated and may become unreliable because of subsequent market or economic circumstances.

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The information contained in this document may include, or incorporate by reference, forward-looking statements, which would include any statements that are not statements of historical fact. These forward-looking statements may turn out to be wrong and can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors, most of which are beyond BitBull’s control. Investors should conduct independent due diligence, with assistance from professional financial, legal and tax experts, on all tokens discussed in this document and develop a stand-alone judgment of the relevant markets prior to making any investment decision.