What do Bitcoiners, politicians and financial experts think?
Rising prices are making headlines around the world. Across the pond in the United States, inflation recently hit a 40-year high. The situation is serious in Europe, with prices rising more than 5% in the euro area and 4.9% in the UK.
As prices rise, Bitcoin (BTC) is stagnating at around $39,000. This raises many questions: is Bitcoin an effective hedge against rising prices, what role can Bitcoin play in a high inflation environment, and did Bitcoiners know inflation was coming?
Experts from the world of Bitcoin, finance, and even European politics have answered these questions, sharing their views with Cointelegraph on the alarming price rises in Europe.
According to data analyst Kaiko’s monthly report, the price of Bitcoin parade before inflation, implying that Bitcoiners may have priced higher and stacked sats to hedge against inflation.
Danny Scott, CEO of the UK’s leading Bitcoin exchange, CoinCorner, supports this argument. He is not “surprised at the levels of inflation we are seeing around the world”.
“It’s been in the works for the better part of a decade and COVID has just accelerated it. True inflation is swept under the rug to keep a positive picture of how inflation is “under control”.
Another Bitcoiner, this time an MP, is again “not surprised” by runaway inflation. Belgian opinion leader Christophe De Beukelaer was the first European politician to take his salary in Bitcoin.
He told Cointelegraph that “when we pump in trillions, like we have, at some point you have to foot the bill.” But it doesn’t just have a financial impact, “people don’t see it and realize it, but inflation has a major impact on their well-being.”
Nicolas Bertrand, Ambassador of the Global Blockchain Business Council and financial executive hailing from Borsa Italia and the London Stock Exchange, told Cointelegraph:
“Expansive monetary policies are contributing to higher levels of inflation and I wouldn’t be surprised to see this situation last longer than expected.”
For De Beukelaer, however, he believes that “at some point we will experience a great monetary crisis”.
With the crisis in Ukraine now aggravating the problem, what does this mean for near-term inflation levels? Ambre Soubiran, CEO of Kaiko, told Cointelegraph that “soaring commodity prices are likely to keep inflationary pressures strong and dampen growth due to the close economic ties between Europe and Russia.”
She added that the current price action in which Bitcoin slipped from a high of $69,000 is likely due to “markets pricing in a rate hike from the European Central Bank this year.”
Inflation is here to stay, so should you HODL Bitcoin?
Bitcoin as an inflation hedge is a popular narrative in the United States. In Europe, the jury is out or, as De Beukelaer puts it, “it’s hard to say for sure”. That said, “as its growth is limited and transparent, it can be expected to be an effective bulwark against inflation.”
For Bertrand, with his expertise in traditional financial markets, the situation is clear:
“Unlike fiat currencies, other widely available investment assets, and even gold, Bitcoin’s value cannot be negatively affected by the issuance of new coins. This provides a solid foundation and makes Bitcoin an interesting asset in a context of rising inflation.
Nevertheless, there are some caveats. There is not “enough data to prove that Bitcoin is statistically a good inflation hedge”. Additionally, Bertrand shared that we’re not “there yet in terms of adoption to consider Bitcoin a good hedge.”
Soubiran has a similar view, explaining that “Bitcoin has moved in tandem with risky assets over the past few months and is unlikely to decouple in the current uncertain monetary environment.”
In contrast, Bendik Norheim Schei, Head of Research at Arcane Crypto, and Scott are focused on Bitcoin’s role in an inflationary environment. Schei told Cointelegraph:
“Bitcoin is a great option for those who want to bet on crazy inflation. Or rather, hedge against this scenario. A scarce asset with a fixed supply is a solid alternative if global economies reach extreme levels of inflation.
For Scott, “Bitcoin solves the problem of separating money from the state but has many other advantages such as hedging against inflation in a decentralized and global way”.
Since in some big emerging countries like Argentina “pass 50% inflation, people are looking for solutions – Bitcoin being one of them”. In a warning note, he presumes, “you don’t need Bitcoin until you do.”
Bitcoin and an inflationary future
Whether Bitcoin acts as a store of value or an inflationary hedge is up for debate, but according to De Beukelaer the important thing is that “we have a choice”. If a citizen “no longer has confidence in the euro, dollar or other fiat, he can turn to Bitcoin/crypto. And, it is positive. Power alone always ends up doing stupid things. It is healthy that a monetary counter-power comes to balance it to cure it of its excesses.
Bertrand also believes that balance is key. “As always, one needs to think very carefully about their consolidated asset allocation and keeping the concept of balance in mind.”
However, with “purchasing power eroded by half in 10 years”, according to De Beuekalaer, there is an additional level of pressure. Essentially, if there was ever a time to be smart about Bitcoin, it’s now.
Scott is succinct. “Education is still massively essential, not just about Bitcoin but about finance and the economy as a whole.” Incidentally, Cointelegraph has put together a handy explainer on Bitcoin and inflation.
Schei has the final say on the flagship cryptocurrency:
“This is a long-term bet on an asset that will thrive in a world where major fiat currencies are losing their value due to runaway money printing and extreme inflation.”
With more thought leaders and billionaire investors coming out in favor of Bitcoin or claiming that fiat currency is Go to zero, it might be worth sticking with some.