Bitcoin jumped to a new all-time high and other cryptocurrencies were lifted too after US consumer inflation numbers came in much stronger than expected.
The US consumer price index (CPI) increased 0.9% in October after rising 0.4% in September.
Over the last twelve months it is up 6.2%, compared to expectations of a figure of 5.9%, which is the highest level for 30 years.
Other assets seen as hedges against inflation leapt in reaction, with Bitcoin hitting bang-on US$69,000 not long after the CPI data, and at the time of publication was up 3% for the day at US$68,492.39.
Ethereum was up 1.2% at $4,845.04, having earlier notched a high of US$4,867.8
More tradtional hedges such as gold also jumped, climbing around $30 to hit its best levels since June at US$1,865, with the Japanese yen-dollar also rallying too.
“If you ever doubted investors still see gold as an effective hedge against inflation, then you got your answer when the latest inflation data was released earlier,” said Fawad Razaqzada, market analyst at ThinkMarkets.
With Bitcoin and Ethereum rallying he said it confirmed his suspicion “that the crypto rally has been fuelled in part by the rising levels of inflation”.
Using Bitcoin as an inflation hedge seems to me to be a bit like keeping 100 venomous snakes in your house to guard the place from intruders.
Yes, it *may* be effective, but it’ll be a lot more exciting then necessary and chances of you surviving the experience intact are low.
— Lorcan Roche Kelly (@LorcanRK) November 10, 2021
Naeem Aslam at Avatrade also commented, saying: “for gold, which is a perfect inflation hedge, we see massive upward moves. Basically, gold is on fire.
But so was bitcoin “despite the fact that the dollar index is up, as traders believe that the fed is behind the curve and they need to do something to control the pace of inflation”.
Craig Erlam at Oanda said he has never been on board with the suggestion that bitcoin is an inflation hedge, “but it’s clear today that the narrative is sticking. The cryptocurrency rallied around 4% in the short time following the US CPI number and just like gold, it’s giving very little back.
“New record highs for bitcoin and another box ticked as far as the crypto community will be concerned. And if the narrative has indeed stuck, this could bode well in the near term as the inflation data may get worse before it gets better.”
In a flows-driven world, if enough people are willing to bet that Bitcoin will act like an inflation hedge, it will probably act like an inflation hedge sometimes
— Sid Verma (@_SidVerma) November 10, 2021