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US Inflation’s 3-Decade-High Surge Provides Tailwind for Bitcoin
The Labor Department’s Consumer Price Index is closely tracked by bitcoin traders because the cryptocurrency is seen by some investors as a hedge against inflation.
The main U.S. inflation rate surged last month to its fastest in three decades, according to a Labor Department report Wednesday that’s being viewed as a positive for the price of bitcoin.
The Consumer Price Index for all items rose 6.2% in the 12 months through October, the highest since 1990. Economists had projected an increase in the October CPI of 5.9% over the past 12 months.
STORY CONTINUES BELOW
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Inflation is closely tracked by cryptocurrency traders because many bitcoin investors say the digital asset – whose supply is limited by the underlying blockchain’s programming – can serve as a hedge against rising prices.
Bitcoin’s price has more than doubled this year, supporting a broad rally in cryptocurrencies where the total market value of all digital tokens recently topped $3 trillion for the first time.
The bitcoin price hit an all-time high close to $69,000 on Wednesday after the report. As of press time the largest cryptocurrency by market capitalization was changing hands around $68,568.84, up 2.5% over the past 24 hours.
Economists say that supply-chain bottlenecks, shipping constraints and even limited warehouse space as the coronavirus pandemic retreats might be helping to fuel higher prices. That’s in addition to a tight labor market that has put upward pressure on wages. Companies often try to pass these extra costs along to consumers in the form of higher retail prices.
There’s also speculation that the trillions of dollars of money-printing over the past couple years by the Federal Reserve and other central banks might be contributing to dollar debasement – further supporting the investment case for bitcoin because its supply is tightly controlled.
Bradley Keoun
Bradley Keoun is CoinDesk's managing editor of tech & protocols, where he oversees a team of reporters covering blockchain technology, and previously ran the global crypto markets team. A two-time Loeb Awards finalist, he previously was chief global finance and economic correspondent for TheStreet and before that worked as an editor and reporter for Bloomberg News in New York and Mexico City, reporting on Wall Street, emerging markets and the energy industry. He started out as a police-beat reporter for the Gainesville Sun in Florida and later worked as a general-assignment reporter for the Chicago Tribune. Originally from Fort Wayne, Indiana, he double-majored in electrical engineering and classical studies as an undergraduate at Duke University and later obtained a master's in journalism from the University of Florida. He is currently based in Austin, Texas, and in his spare time plays guitar, sings in a choir and hikes in the Texas Hill Country. He owns less than $1,000 each of several cryptocurrencies.
