By Landon Manning
With the world’s reserve currency, the U.S. dollar, hitting a dramatic spike in inflation, bitcoin (BTC) has recently risen to its highest-ever valuation, showing how it can offer a radical alternative to the world of traditional finance.
Several trends have been building in the stability of the U.S. dollar over the course of the fiscal year 2021, with a steady increase beginning in the first quarter and continuing to gain momentum as the months rolled along. Reuters identified several key metrics on the state of this dollar inflation, claiming that this inflation is not only higher than it has been in 16 months, but the actual rate that inflation has been climbing this year has not been seen in the U.S. dollar for more than 30 years.
With the continued onslaught of the COVID-19 pandemic causing major issues for the global supply chain, disrupting the prices of food and gasoline as well as the availability of many everyday consumer goods, several foundational aspects of the U.S. economy have been impacted.
It should come as little surprise, then, that the failing confidence of this older monetary system has come as a boon for the radically decentralized new vision promised by bitcoin and other cryptocurrencies. The price of bitcoin began to climb steadily towards the end of 2020, but the price reached a new all-time high in early 2021, and has remained relatively consistent since then. On Wednesday, November 10, Bitcoin reached another brief spike, breaking a new price record of $69,000, before going back down to around $65,000.
This data lends credence to predictions made by JPMorgan Chase analysts in 2021, who compared how the valuation of bitcoin has changed dramatically in relation to the valuation of gold, which has been respected as a durable store of value for centuries. The data shows that more and more consumers are turning to bitcoin as a hedge against inflation, rather than gold, building evidence for greater public confidence in the cryptocurrency.
These claims are backed up by new data as well, as CNBC has shown in a report on November 10. Although gold has gone through a remarkable spike in the week before bitcoin hit its high-water mark, not only was this spike temporary, but also, critically, even this new rise has not been able to match the level that bitcoin saw within the same time frame, let alone what it has been consistently seeing for months.
The next moves for bitcoin are somewhat difficult to predict. Price movements in several other “inflation hedges” have occurred in this time period, such as with ether, generally regarded as the second-most-prominent crypto asset. But again, bitcoin’s success has edged out other cryptocurrencies.
Meanwhile, none of the underlying trends in the U.S. economy that have created this inflation have been addressed significantly, and so if this trend is to increase, it seems logical to assume that bitcoin has further price highs in its near future.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
