The Fed’s Fight Against Inflation Is Bad for Bitcoin According to Bitfury CEO
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Answer The Fed’s Fight Against Inflation Is Bad for Bitcoin According to Bitfury CEO
According to the CEO of Bitfury, traders do not view Bitcoin as a great hedge against inflation during periods of financial tightening.
That is why traders can expect the price of Bitcoin to remain relatively low in the short term at least.
In a short interview on CNBC on August 29, the Bitfury chief also criticized the Securities and Exchange Commission (SEC) for suing several cryptocurrency makers, saying regulators need to get serious and provide proper guidance rather than go to court.
The US inflation rate is currently 8.5%, down very slightly from a 40-year high of 9.1% recorded last July, but still well above the target rate of 2%.
Read:How will Bitcoin (BTC) go in the short term before going up?
Until recently, the prevailing view in the cryptocurrency world was that deflationary assets like Bitcoin would do well in such a hyperinflationary environment.
But in recent months, this theory has been tested and found to be incorrect.
Currently the price of Bitcoin today is hovering around the $20,000 mark, down 60% from just last year.
According to the head of Bitfury, the Fed’s strong response to high inflation pressures has calmed the market.
The same spokesperson added to CNBC:
We’ve talked about the idea that Bitcoin is a way to hedge against inflation.
The more the market expects tough policy from the Federal Reserve, the more people believe that the Fed will maintain an aggressive stance, and this will hurt Bitcoin.
Since the beginning of the year, the Fed has pursued a policy of severe fiscal tightening, which has increased the cost of borrowing through interest rates.
At the beginning of 2022 interest rates were close to zero.
The Fed raised rates by 0.25% in March, 0.50% in May, 0.75% in June and 0.75% in July, in total, rates have been raised by 2.25% since the beginning of the year.
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Another reason for Bitcoin’s perceived underperformance could be the type of inflation the market is currently facing.
According to Stephen Lubka of Swan Bitcoin, bitcoin only performs well in inflationary environments caused by currency depreciation, or in the normal aspect of money printing.
Currently, the bulk of the inflation is due to supply chain disruptions and scarcity of basic commodities such as wheat and oil.
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