Bitcoin Beats Inflation Better Than the US Dollar, According to the Federal Reserve
The Federal Reserve unintentionally revealed that Bitcoin (BTC) is outperforming the US dollar when it comes to beating inflation. In a blog post initially published in June 2022 and updated since then, the St. Louis Fed compared the purchasing power of BTC and USD by using the example of buying eggs.
Bitcoin vs. US Dollar: The Stagnation of “Eggflation”
Although Bitcoin hodlers have better use cases for their BTC holdings than purchasing eggs, the Fed’s blog post aims to show that Bitcoin’s buying power is less competitive compared to the dollar. The anonymous author of the post measured the price of a dozen eggs in BTC (satoshis) and USD since January 2021.
“The price fluctuates quite a bit, between 2829 and 6086, which is much more than it did for the U.S. dollar price,”
The charts included in the post indicate that since reaching its peak in December 2022, the number of satoshis required to buy a dozen eggs has decreased more compared to the equivalent amount in USD. As of August 2023, BTC hodlers need 70% fewer satoshis for the purchase, while USD requires 58% less.
When comparing the cost of eggs from the start of 2021, both currencies have experienced an increase — 39% for USD and 73% for BTC. However, this comparison is not very useful since BTC/USD traded at similar levels during that time, and the US Consumer Price Index (CPI) year-on-year increase was below the Fed’s target of 2%. To gain real insight into Bitcoin’s performance, a longer-term perspective is needed.
Recession Looms Large
Analysts suggest that actions by foreign states may attempt to address the currency imbalance as their currencies depreciate. Meanwhile, warning signs are emerging in the US economy, indicating a potential recession in 2024. The Fed’s own data shows a near 60% probability of a recession in September, while bond yields are skyrocketing in what is known as “bear steepening.”
Hot Take: Bitcoin’s Resilience Amidst Inflation Concerns
Despite the fluctuations and comparisons, Bitcoin has shown resilience and has outperformed the US dollar when it comes to beating inflation. While the cost of eggs has increased for both currencies since the start of 2021, BTC hodlers require significantly fewer satoshis to make the same purchase compared to USD. This demonstrates Bitcoin’s ability to preserve purchasing power over time. As concerns about inflation and potential economic downturns persist, Bitcoin continues to be an attractive asset for investors looking to protect their wealth.
By
By
By
By