Inflationary concerns have been getting graver with every passing day. At this stage, a few nations have acknowledged it as a real problem, while the rest, continue to bury it under the blanket of neglect.
Other than depending on assets that act like hedges, there’s hardly any way to protect one’s savings from inflation’s grip. BTC, the crypto market’s largest coin by capitalization, has however been associated with the aforementioned tag. And to a fair extent, it has been able to shield the common man from the clutches of the day-to-day rise in price.
However, to continue to do so, it should be able to retain its valuation with time.
Fundamentals – Bitcoin’s trump card
Apart from the usual fundamentals and factors like velocity and squeezes, Bitcoin’s value is likely to be driven by macro factors like buyer/user wealth, opportunity costs, and supply changes over the long term.
As far as the fundamentals are concerned, Bitcoin has been faring pretty well on this front. Consider its velocity itself, for starters. Generally, assets with low velocities are supportive of LT high valuations. Since mid-2016, BTC has been able to keep its velocity low[1] on the macro-frame, which is quite a healthy sign.
The BTC market has additionally been witnessing healthy-squeezes[2] on a regular basis. Even they have been able to elevate the asset’s price.
Source: Glassnode
Inflation: A boon for Bitcoin?
Well, a lot has been happening in the macro-financial landscape and people in power in the U.S. have been quite vocal about the same. For instance, just a day back, Fed Chairman Jerome Powell spoke[3] about inflation before the Senate Banking Committee and accepted that inflation is proving to be more powerful and persistent than expected.
After acknowledging that the “risk of higher
