Other cryptocurrencies are also on the rise. The Bloomberg Galaxy Cryptocurrency Index, which tracks major cryptocurrencies, rose 2.4%, the highest level since May. Proponents of cryptocurrency believe that unlike the U.S. dollar or any other traditional currency, the supply of digital currency is limited and will not depreciate due to excessive currency issuance by the government or central bank.
Sui Chung, CEO of CF Benchmarks, a cryptocurrency benchmarking agency, said: “Bitcoin continued its gains that began in August, and then was boosted by the listing of Bitcoin futures ETFs in October, but the current gains seem to be affected. This has contributed to the continued inflation of the world’s major economies.”
In the past few months, the prices of all commodities, from food to gasoline to housing, have risen faster than economists expected, and the increase has been even greater. The U.S. October consumer price index increased at the fastest rate since 1990. High inflation has become a sign of the economy’s recovery from the epidemic and has weakened consumers’ spending power, even though consumers’ wages have increased.
The main participants on Wall Street also said that they bought this cryptocurrency, or became interested in it, thanks to the theory of inflation hedging. In recent months, the fact that gold, which is generally considered an inflation hedging tool, has performed poorly, while Bitcoin is rising, supports the view that “Bitcoin can be used to hedge against inflation”.
However, it was also pointed out that the history of cryptocurrency is not long enough to prove that it can effectively hedge against inflation. Cam Harvey of Duke University has made this view in the past. He pointed out that in theory, if investors think that Bitcoin is similar to gold, then it may retain its value for a long period of time, such as a century or more. In his research on gold, he found that the value of gold has remained the same for thousands of years, but he also found that the price of Bitcoin is prone to frantic rises and collapses in a relatively short period of time.
Matt Maley, chief market strategist at Miller Tabak + Co. pointed out that many investors use Bitcoin as a hedge against inflation, but he doesn’t believe this will have a good effect. Gold has been operating as an inflation hedging tool for centuries, so people should combine gold and Bitcoin as a hedging tool.
The spot price of gold has fallen by 1.8% this year, while Bitcoin has risen by more than 130% during this time. JJ Kinahan, chief market strategist at TD Ameritrade, said: “People are looking for things to invest in. But we have not experienced the use of cryptocurrency to hedge against inflation. Therefore, it is difficult to judge whether it can hedge against inflation. Many people think that It can be used to hedge against inflation, but time will tell.”