The current inflationary environment has made investors desperate to look for potential assets to act as a security.
Considering the declining trend prevailing in the stocks and cryptocurrencies, many crypto advocates have continued to count on Bitcoin as a hedge against inflation, including renowned investor Bill Miller; however, a recent study suggests otherwise.
Per the report released on November 3, the two largest cryptocurrencies by market capitalization, i.e., Bitcoin and Ethereum, have recorded absolute returns of 6.5% and 4.5% on the Consumer Price Index (CPI) in 2022, respectively. The historical return values are above the yearly average, thus indicating that the assets have failed to act as an inflation hedge. It also stated that Bitcoin and Ethereum had performed inversely to inflation and nominal interest rates this year.
As reported by Todayq, Bitcoin has exhibited considerable stability in the price range despite its failure as an inflation hedge. Recently, it has been primarily trading between $19,000-$21,000, signifying a drop in volatility. The volatility for Bitcoin dropped below Nasdaq and S&P 500 for the first time since 2018. The average annual volatility for Bitcoin was valued at 79%, whereas the current average volatility rate stands at 63%.
However, the trust in Bitcoin has continued to rise in recent times expecting it to rally in the coming months. Contradictory to the previous bear market scenario wherein a lot of investors were witnessed panicking; there has been a surge in investment from accounts holding values above 10,000 Bitcoin suggesting an increase in institutional adoption.
Recently, the Bitcoin price is also struggling to cross over the $21,000 level. At the time of writing, the price of Bitcoin is recorded at $20,592.30, which is a 1.90% surge from the previous day.