As the US Federal Reserve looks to tighten its extra-easy currency policy, investor hypotheses that crypto investments could act as an inflation hedge are failing a major market test. An alternative hunch is that the pandemic-time crypto boom reflects only asset inflation as seen in other gainers, confirmed in a sharp decline since November when it became clear the Fed should act. Most tokens have lost almost half their value since that peak, including bitcoin. Saturday’s decline was partly due to the Russian central bank’s proposal to ban crypto mining and use, which could stifle demand, but the “hedge” argument cost monetary authorities hostility.
Some early bitcoin investors argued that its supply limit meant that its value would be inversely related to state-issued currencies, subject to the folly of debauchery as the central bank went about issuing them. For some time, it seemed to hold. But, ironically, the event he defended may have inflated cryptos as a hot target of ride-the-wave speculation, leaving them vulnerable to Fed-policy reversals like other assets. can. Expect high crypto volatility and very little hedge talk this year.
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