Bitcoin(BTC) traded down to $38,600 on today’s CPI print.
Inflation, measured by CPI, came in at 7.9% last month, an increase of 0.4% from January.
Inflation is currently running at its highest level since 1980. It’s a structural issue in our economy, but it’s been exacerbated by COVID and the recent conflict in Ukraine.
Inflation isn’t just a US phenomenon, though. The world is seeing high inflation across many jurisdictions. The inflation rate in Turkey is 54.4%, the highest of the G20 nations, followed by Argentina(50.7%), Brazil(10.4%), and Russia(9.2%).
The European Central Bank(ECB) also just raised its 2022 inflation expectations from 3.2% to 5.1%.
These numbers are astronomical. However, if we measure CPI now in the same way that we measured it in 1980, the number is actually well into the double digits.
Bitcoin(BTC), widely accepted as an inflation hedge, is seeing increased volatility in this inflationary environment. It traded up to $42,000 yesterday before dumping back down to $38,000. Here’s the daily chart:
Bitcoiners have been sounding the ‘inflation’ alarm for years now and the data is beginning to validate those claims, month by month.
However, it seems that central banks around the world now find themselves between a rock and a hard place. The last time inflation was this high in the U.S, the effective federal funds rate(determined by the Federal Reserve) was higher than 20%.
Now, with inflation just as high, the effective federal funds rate sits at 0.08%.
On March 15th and 16th, the Fed will convene to discuss monetary policy going forward. They were expected to hike rates, but in an economy on the brink of collapse, any monetary tightening could send the world into a recession. However, if they choose to keep rates low, inflation will continue to ravage the average citizen. On top of this, we are rapidly approaching the U.S mid-term elections in November.
Will the Fed tighten into the midterms to ease inflation expectations and risk a recession, or will they allow inflation to keep running hot?
Let us know what you think in the comments below, or on Twitter.
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