Isn't Bitcoin (BTC) a hedge against inflation? A lot of crypto-analysts agree with that. As a result of Russia's invasion of Ukraine, crude oil prices have risen to their highest level since 2008.
However, things aren't as straightforward as they appear. As long as oil prices remain high, the Federal Reserve may feel compelled to tighten monetary policy in order to combat the threat of rising prices.
Since the Fed's most recent hawkish comments, bitcoin has fallen in tandem with the stock market.
Some crypto specialists are wondering if bitcoin may become a safe haven asset like gold — an item whose price rises or even holds its worth when the stock market declines.
Jason Deane, an analyst at Quantum Economics, wonders if bitcoin is showing the first indications of maturity as a safe haven. The asset could benefit if this is the case, at least hypothetically.
Since the 27th of February, Bitcoin has gained 12 percent, making this the best week of 2022 so far. As a result of news of the invasion, the price of bitcoin first fell to $30,000, but the subsequent rebound has brought it back to $40,000. As of this writing, the price of a bitcoin was hovering around $43,000.
Inflation in the price of crude oil
At one point during Thursday's trading session, West Texas Intermediate crude hit $116.57 per barrel, the highest level since 2008.
Many analysts are concerned that rising oil prices could lead to increased gas prices for drivers, as well as higher expenses for manufacturers and the transportation industry. Inflation is already at its greatest level in four decades as a result of this dynamic.
At the House of Representatives' Financial Services Committee, Federal Reserve Chair Jerome Powell indicated he expects the central bank will raise interest rates 0.25 percentage points later this month.
Pressure on the labor market and robust economic demand have convinced Powell that the Federal Reserve should begin to implement monetary policy that is more aggressive.
In his remarks on Wednesday, he avoided mentioning oil explicitly. On Thursday, he will appear before the Senate Banking Committee.
As Brian Coulton, Fitch's Chief Economist told CoinDesk, the Russia-Ukraine conflict will raise oil and gas costs globally including in the United States.
"Core" inflation ignores the influence of unpredictable food and energy costs. However, recurrent "shocks" from oil prices could be an issue, according to Coulton.
"Headline inflation shocks matter," he continued, "if they keep coming."
Many speculators' expectations for bitcoin to operate as an inflation hedge have been disappointed so far in 2022, which has sparked a firestorm of discussion.
The largest cryptocurrency by market capitalization has lost 8% of its value this year due to a series of unexpectedly positive consumer price data readings. "Stagflation," where inflation is strong but economic growth is minimal or nonexistent, has even been discussed.
This year, traders have showed a preference for gold, which has outperformed bitcoin thus far. As a result, bitcoin's price has taken a hit.
Mark Hackett, chief investment research officer at Nationwide, said crypto's volatility and regulatory uncertainty and unpredictable swings undermine its efficacy against inflation, oil, or economic instability.
We've had an incredible seven days of trading in the $34,000 to $46,000 range for Bitcoin. However, when it reached the $45K region and an upward trendline, it was brutally rejected.
On a long-term basis, the chart on the daily basis
It's currently possible to sell above $46K and there's a lot of possibility to acquire below $35K.
Furthermore, the 1-hour RSI appears to be diverging from the price, which has led to the current downturn.
To continue the uptrend, the price must make a new bottom. After breaking above a multi-week descending trendline (marked purple on the chart), Bitcoin was rejected by the 100-day moving average line and is currently re-testing this level as support. If support holds, we could see a new bullish leg.
Short-Term: The 4-Hour Chart
In the $41.5K – $42.8K and $38.6K – $40.6K timeframes, there are two apparent imbalance zones. Both could be used as a form of support.
Markets virtually always fix imbalances on occasions when prices rapidly increase, as many technical experts believe. Liquidity will be absorbed into lower price levels before an eventual continuation to the upside is feasible, therefore the market can be expected to witness some volatility in the short term.
"Uncertainty" has dominated foreign affairs for the past two years. And the financial markets, more than any other, abhor uncertainty.
It's been a turbulent two years for the global economy, which has been influenced by everything from a worldwide epidemic to inflationary concerns to a geopolitical battle.
Zooming out and taking a look at the larger picture is often advocated in times of uncertainty. For example, how Bitcoin's supply dynamics have changed from its initial block.
To summarize, an increase in these age bands indicates HODLing and accumulation (green), while a decrease in them indicates selling and distribution (red) to long-term holders.
There has been a substantial increase in the amount of coins that have not been traded in over three months. In spite of the short-term volatility, Bitcoin's positive megatrend seems somehow inevitable.
Investing in Bitcoin, like any other speculative investment, comes with a degree of risk. There has been a modern crypto ecosystem since its beginnings thanks to Bitcoin, which was launched in 2009. There was a small but dedicated group of investors who saw it as a viable alternative to the fiat currency system.
Bitcoin's potential to disrupt the financial industry has forced existing financial institutions to make a choice: accept cryptocurrencies or be left behind. Investing in bitcoin comes down to two things: your appetite for risk and your outlook on humanity's future. To reduce their reliance on the U.S. dollar, Russia, for example, has announced that it is investigating cryptocurrencies. At this point, Bitcoin is simply too important to overlook in its potential to cause significant damage to the US dollar.