Wed. Jan 26th, 2022

The largest digital asset by market value rose as much as 3.3 percent to $ 44,085 on Wednesday.

By Bloomberg

Bitcoin climbed above $ 44,000 for the first time in a week as most U.S. inflation revived in four decades the debate over whether the cryptocurrency is a hedge against rising consumer prices.

The largest digital asset by market value rose by as much as 3.3% to $ 44,085 on Wednesday, following the release of the consumer price index, which climbed 7% in 2021. This means that inflation in the US has registered its largest annual profit since 1982. Some market participants speculated that the increase would be higher, which would help drive other so-called risk assets such as stocks higher.

“Inflation today was in line and maybe the Fed does not need to accelerate its tightening, which means the outlook for cryptocurrencies could only be a little better,” said Michael Reynolds, vice president of investment strategy at Glenmede. “As it becomes more attractive on a relative basis to hold assets in cash as the Fed raises rates, we would expect it to take some of the wind out of the sales of the crypto assets.”

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Crypto proponents have long argued that Bitcoin and other digital assets, because they are a distinctive asset class, can act as hedges against swings in other areas of the financial market. Only 21 million Bitcoin will be put into circulation under the computer protocol that controls issuance, although that figure is not expected to be reached for several decades.

Other cryptocurrencies also rose on Wednesday after the data release. Ether was up 4.5% to $ 3,375 from 1:12 in New York, while the Bloomberg Galaxy Crypto Index added 3.5%.

“What we’re seeing today is not ‘yay, inflation hedging’ and all that, the risk assets are in again,” says Noelle Acheson, head of market insights at Genesis Global Trading Inc. “It’s because we do not think Powell is going to raise rates as much as the market has discounted because inflation was in line with expectations and not worse.”

Making sure that Bitcoin or any other cryptocurrency can be a good inflation hedge is still a matter of debate, even if notable analysts and investors cite it as such. Some argue that Bitcoin just did not exist long enough to burn out its inflation hedging status, while Cam Harvey, a professor at Duke University and a partner at Research Affiliates, has long said that it is too much like a speculative asset acts and is prone to periodic crashes.

“The jury still looks at Bitcoin as an inflation hedge and only time will tell,” Austin Vincent, vice president at Gullane Capital, said by telephone from Memphis.

Still, Wednesday’s advance was a welcome respite for anyone who’s seen prices fall over the past few weeks as the Federal Reserve becomes more false. According to a Blockforce Capital analysis using Glassnode data, new retail investors have not piled up since the Bitcoin crash in early December. What makes matters worse is that most of the short-term market participants – who have largely entered the market in recent months – have their investments underwater. As of Tuesday, the average price they paid was higher than the price of a single Bitcoin, Brett Munster of Blockforce wrote in a note.

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There’s a lot of resistance around $ 52,000, “and until we break up and hold on to it, we can continue to see short-term volatility,” Munster said. “However, if we break above and stay above it, sales pressure will go away and it will become more likely for new participants to start entering the market again. It could cause the price increase we all expected. ”

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