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- Inflation worries were fueled on Tuesday as the CPI posted its largest one-month rise in 13 years.
- However, Bitcoin, widely viewed as an inflation hedge, is down after the CPI measurement.
- However, some bitcoin bulls claim that the cryptocurrency will prove its use as a hedge against soaring prices.
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Inflation concerns were fueled Tuesday as consumer prices saw their largest one-month spike in 13 years between May and June, but Bitcoin, often touted as a hedge against a weaker dollar, did not respond in the same way.
US stocks fell as it opened while Bitcoin was flat and then fell steadily through the morning and early afternoon. The price of the world’s largest cryptocurrency by market cap was about 2% lower than $ 33,000 for most of the day after the CPI numbers were announced.
The asset traded at $ 32,854 at 1:10 p.m. ET on Tuesday.
This has also happened in previous readings. In May, Bitcoin fell 7% on a day when CPI data showed prices were rising as fast as they have been since 2008. In theory, higher inflation would increase demand for assets that can serve as an alternative store of value to cash – including Bitcoin.
“Bitcoin is no longer acting like an inflation hedge and will continue to exceed expectations for higher returns,” said Ed Moya, senior equity analyst at foreign exchange company Oanda, in a statement on Tuesday.
That inflation is viewed as temporary, however, could be a reason the June report wasn’t enough of a catalyst to break Bitcoin’s sideways trading, Moya added.
Bitcoin has long been touted as a hedge against inflation, largely due to its finite $ 21 million supply in coins. The idea is that Bitcoin serves a similar purpose to gold to protect against ruthless fiscal policies that devalue fiat currencies.
Billionaire investor Mike Novogratz once said the value of Bitcoin has risen because governments print money like “toilet paper”.
However, some bitcoin bulls claim that one day the cryptocurrency will still prove its purpose.
“Bitcoin is still a long-term hedge against inflation for most investors,” John Wu, president of Ava Labs, the team behind the altcoin avalanche, told Insider.
He continued, “However, given the number of new investors in this space, there are investors who consider it a risk investment and these additional investors could sell as a source of capital in the short term.”
Bitcoin’s price has been in a range since a broader cryptocurrency crash in May.
But it appears that the more the digital asset is tested the more it is being tested the more it holds at its support level of $ 30,000, Julius de Kempenaer, senior technical analyst at technical analysis platform StockCharts.com, told Insider.
“As a result, any break below that level becomes more and more meaningful,” he said. “If that happens, expect $ 20,000 as the next level of support.”