Bitcoin, which was once touted by crypto enthusiasts and wealth managers alike as a hedge against inflation, has continued to fall in recent weeks even as new data has shown costs are soaring.
On Tuesday, the Labor Department announced that its Consumer Price Index, which measures a basket of goods and services as well as energy and food costs, jumped 5.4 percent in June from a year earlier, the fastest pace in 13 years.
US stocks tumbled at the open while Bitcoin remained flat and tumbled steadily throughout the morning and afternoon.
Even on Wednesday, after several major players on Wall Street voiced concern that inflation won’t be a temporary blip, but rather that elevated prices are here to stay, Bitcoin remained at almost the same level as before the CPI announcement, trading at around $32,800 per coin.
The recent wave of hot inflation data goes back to March, when the CPI clocked in at 2.6 percent from a year earlier. In April, that figure rose to 4.2 percent, then 5.0 percent and 5.4 percent in May and June.
Briefly in March, Bitcoin appeared to be rising along with the CPI numbers, strengthening the argument that it protects holders from a weakening US dollar. The crypto peaked in mid-April at more than $62,000 per coin.
But then, as inflation concerns continued to get worse throughout the spring, Bitcoin reversed course, cutting its price in half just as Americans’ purchasing power was declining rapidly, which is when many predicted Bitcoin would prove to be most valuable.
“Bitcoin isn’t behaving like an inflation hedge anymore and will continue to remain heavy over expectations over higher yields,” Ed Moya, senior equity analyst at foreign exchange firm Oanda, said Tuesday in a note to clients.
To be sure, some have said that Bitcoin needs more time for its price to reflect rising inflation. David Morris, a columnist at CoinDesk, argued that now could be a great time to buy Bitcoin if inflation continues to rise.
“If you’re losing faith in the Fed (or didn’t have much to begin with), there’s increasingly strong empirical evidence that bitcoin should be on your shopping list,” he wrote.