U.S. inflation breaks 40-year record: Can Bitcoin serve as a hedge asset?
On Feb. 9, the United States Bureau of Labor Statistics reported that the Consumer Price Index, a key measure capturing the change in how much Americans pay for goods and services, has increased by 7.5% compared to the same time last year, marking the greatest year-on-year rise since 1982. In 2019, before the global COVID-19 pandemic broke out, the indicator stood at 1.8%. Such a sharp rise in inflation makes more and more people consider the old question: Could Bitcoin, the world’s largest cryptocurrency, become a hedge asset for high-inflation times?
Ironically, the fundamental reason behind the unprecedented inflation spike is the U.S. economy’s strong health. Immediately after the COVID-19 crisis, when 22 million jobs were slashed and national economic output saw a massive decrease, the American economy kickstarted a massive recovery on the heels of the relative success of the vaccination campaign. However, supply chains appeared to be unprepared for such a rapid return of business activity and consumer demand.
The rebound was fueled by the Biden administration’s grandiose $1.9 trillion COVID-19 relief package, with the majority of American households receiving thousands of dollars in direct support by the federal government. Tom Siomades, chief investment officer at AE Wealth Management, believes that the stimulus was excessive, given the overall financial conditions of U.S. households. Speaking to Cointelegraph, he remarked:
Some economists point out a more subtle factor: an alarming exercise of corporate pricing power by U.S. businesses. “Now producers know people can pay more, and will be unwilling to accept lower prices for their products,” Siomades explains.
Now that inflation has become a major political problem
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