On November 14, Bitcoin fell by 4.1% following US inflation data that slightly exceeded market expectations. This event raised questions about Bitcoin’s role as an inflation hedge.
Persistent Inflation and Bitcoin's Role
Historically, Bitcoin has benefited from inflation concerns. However, in 2021 and 2022, government stimulus and Fed balance sheet expansion dampened these effects. At that time, recession risks were minimal. Today, the situation has changed, with traders anticipating potential corporate earnings pressure.
US Fiscal Policies and Their Impact on Bitcoin
If the US government successfully limits spending growth, demand for Bitcoin as an inflation hedge may decrease, as investors see less risk in holding US dollars. However, Bitcoin remains attractive as a censorship-resistant and scarce asset.
Bitcoin as an Alternative Reserve Asset
Bitcoin's recent intraday movements have aligned with stock market performance, reflecting concerns over high inflation. At a broader level, US fiscal challenges are likely to persist, as significant cuts to government spending are improbable.
Ultimately, Bitcoin's trajectory toward $100,000 may withstand temporary pressures from inflation and market concerns.
