A disastrous 2022 prompted several criticisms of Bitcoin as an inflation hedge, but Pompliano points to the asset’s recent surge as proof of its resilience.
In the face of mounting criticism, investor and host of The Pomp Podcast Anthony Pompliano believes Bitcoin remains the best hedge against inflation. Pompliano made the remarks on Twitter, saying that critics were missing the bigger picture that was emerging beneath the surface.
According to the serial investor, market movements are based on future events rather than past occurrences, which explains Bitcoin’s meteoric rise in 2021. Investors, according to Pomp, were expecting a sharp rise in inflation following months of rate cuts and cash injections into the economy.
“Bitcoin was around $10,000 for much of 2020, but by March 2021, it had risen to over $60,000.” “That’s a 600% increase in less than a year,” Pompliano wrote. “Although inflation was still low, investors purchased it IN EXPECTATION OF INFLATION.”
By November 2021, BTC had reached an all-time high of over $64,000, despite rising inflationary pressures in the economy. Pompliano noted that the Federal Reserve’s announcement to combat inflation by raising interest rates compelled investors to sell their Bitcoin holdings in favor of value stocks.
During the selloff, BTC fell by more than 70% from its all-time high, prompting critics to question its ability to function as a hedge against inflation. Pompliano pointed out that their position was incorrect because “you would expect inflation hedge assets to fall in price when the Fed is lowering inflation.”
After months in the doldrums, Bitcoin’s price has risen by more than 32% in the last seven days to trade at just over $28,000. According to Pompliano, the surge is simply evidence of growing investor confidence in BTC’s ability to serve as a viable inflation hedge.
With the Fed’s attempt to curb inflation falling short of expectations and renewed plans to raise interest rates, Pompliano believes the market is fleeing to Bitcoin’s relative safety.
“Bitcoin is reacting to the current macroenvironmental situation.” “The market is looking ahead, and it knows that inflation will be higher and last longer than previously thought,” Pompliano said. “Investors require an inflation hedge once more, and Bitcoin is the clear winner.”