This Chart Says Bitcoin Is A Leading Indicator For Inflation
A new price chart comparing Bitcoin (BTCUSD) to the US Consumer Price Index (CPI) may suggest that BTC is a leading indicator for inflation.
And if what the chart signals is accurate, inflation could come back significantly.
Does Bitcoin Lead Rise and Fall Inflation?
In 2020, the price of Bitcoin set new all-time highs amid a growing inflation hedging narrative and an unprecedented increase in the money supply. Other cryptocurrencies followed.
The idea was that the limited supply of BTC should make the asset appreciate in relation to the declining purchasing power of the dollar. “Fastest horse in the race against inflation” and “gold in the 1970s,” said Paul Tudor Jones.
Except the US Federal Reserve started raising interest rates aggressively and a deflationary phase sucked the value of almost all assets, including Bitcoin. It also managed to somewhat tame inflation, which has since dropped.
Experts not only claimed that BTC failed to be an inflation hedge, but also said that it was dead (again). Proponents of this narrative ended up with the egg in their faces with laser eyes. However, a new chart comparison says these people weren’t wrong, they were just ahead of schedule, just like Bitcoin.
BTCUSD Versus CPI | Source: Elliott Wave International
Crypto Pro compares BTC against CPI
In a new graphic shared by Elliott Wave International as part of a free video hosted by Crypto Pro Service analyst Tony Carrion, Bitcoin appears to be a leading indicator for inflation.
Bitcoin surged ahead of the Consumer Price Index (CPI), rising from several months to a year. The CPI is a key measure of inflation in the United States. The leading cryptocurrency also dropped sharply ahead of the cooling of inflation at the end of last year. Now Bitcoin is going back up. Could this be a sign that inflation once again follows?
If so, inflation could start to pick up in a few more months to a year now that Bitcoin is gaining traction. However, if the leading-lagging correlation between BTC and the Consumer Price Index means anything and holds, a massive Bitcoin rallies to new all-time highs would lead to rising inflation to record highs.
Elliott Wave International regularly releases exclusive cryptocurrency updates and reviews as part of its Crypto Pro service. Tony Carrion is an analyst and educator at Crypto Trader’s Classroom. To learn more, check out the official website.