Ciaran Lyons5 hours ago‘Unsustainable’ deficit, inflation mean more demand for Bitcoin: GrayscaleGrayscale says recent inflation data could be a short-term negative for crypto, but persistent inflation will ultimately foster a supportive environment for crypto.2894 Total views20 Total sharesListen to article 0:00Markets NewsOwn this piece of crypto historyCollect this article as NFTJoin us on social networksStore of value assets, such as Bitcoin (BTC), will continue to be a hot commodity as the United States government continues to overspend and keep interest rates high, according to Grayscale’s managing director of research, Zach Pandl.
“We expect persistent inflation and unsustainable budget deficits to contribute to continued demand for store of value assets, like Bitcoin,” Pandl told Cointelegraph.
Pandl argued that, given the current high inflation, the Federal Reserve is unlikely to reduce interest rates anytime soon. However, upcoming events like Bitcoin halving, scheduled for April 20, rising economic growth and more crypto adoption will fuel Bitcoin’s price.“The Fed won’t be able to cut rates for a while with core inflation this high, but booming nominal growth, the Bitcoin halving and adoption trends like tokenization should create a supportive environment for crypto markets.”
The inflation in March rose 0.4% month-on-month and 3.5% year-over-year, versus 0.3% monthly increase and 3.4% year-over-year estimates from the Dow Jones economists survey show.
The outcome has left many disappointed, as commentators resonated with Pandl’s concerns that persistent high inflation rates will hinder the Fed from lowering interest rates in the near future.
Ernst & Young chief economist Greg Daco told Yahoo Finance that the higher inflation rates put more pressure on “policymakers to sustain a higher-for-longer monetary policy stance.”
Pandl, however, also said that while an increase in the real interest rate is a “short-term negative for crypto,” there will be continued demand for store-of-value assets over the longer term.
From a macro perspective, the 10-year real interest rate soared by 19% from the previous month to 1.934, up from February’s 1.616, which might be a catalyst for prompting investors to gravitate toward less volatile assets, such as bonds and term deposits.
There have been several instances over the years when the 10-year real interest rate experienced a major monthly spike, and Bitcoin’s price significantly dropped in correlation.The 10-year real interest rate. Source: Federal Reserve Bank of St.Louis
The 10-year real interest rate surged by 52.35% from December 2017 to January 2018, rising from 0.573 to 0.873, per the Federal Reserve Bank of St. Louis data.
Similarly, Bitcoin’s price fell sharply during this period, from approximately $12,839 at the end of December 2017 to $9,240 by the end of January 2018, representing a 28% decline.
Related: Bitcoin whales ‘buy the dip’ post-CPI as BTC price gains 3.6%
Following the release of the most recent CPI information, Bitcoin experienced a minor downward shift in its price, mirroring a similar sentiment from investors.
Data from Cointelegraph Markets Pro and TradingView shows that BTC’s price dropped as much as 2.5% on April 10 to an intra-day low of $67,463 on Coinbase.
At the time of publication, Bitcoin’s price stands at $70,640, per CoinMarketCap data.
In an April 11 post on X, crypto analyst Matthew Hyland identified the formation of an ascending triangle on Bitcoin’s price chart, noting that Bitcoin has established a new resistance level above $71,500, reaching $72,329 on April 8.
Magazine: Synthetix founder: It’s DeFi that’s wrong, not the market# Bitcoin# Adoption# United States# Inflation# Interest Rate# GrayscaleAdd reaction