Due to Russia’s invasion of Ukraine, Bitcoin’s bid as an inflation hedge has been severely impeded, while its rival gold has strengthened its position as a safe haven.
Earlier this week, many people questioned whether Bitcoin could be trusted as a reliable store of wealth due to its volatility. Following a year-long boom, bitcoin hit an all-time peak of over US$ 69,000 in November 2021 before halving in value by January 2022. It was trading at US$ 38,693 at the time of publication.
According to economictimes.com, who is the CEO of Relai, a Bitcoin investment program based in Switzerland, Bitcoin remains a speculative asset.
Some feel that peculiar market dynamics around the commencement of the Covid-19 worldwide pandemic boosted Bitcoin’s price growth in 2020. One factor is the massive liquidity provided by the central banks in the aftermath of the outbreak, notably the US Federal Reserve’s decision to cut its benchmark rate to 0 in March 2020.
It enhanced the value of technology-dependent companies’ stock prices and other risky assets; however, it also sent the CPI (consumer price index) soaring.
The CPI ran higher than predicted, reaching almost 7% in the 2nd half of 2021, the highest after 1982, while being initially seen as “transitory” by Fed officials. As a result, market participants expected the Fed and many other central banks to begin raising interest rates to reduce liquidity.
Since November, Bitcoin’s price has fallen in lockstep with other risky assets, suggesting that it may not be safe as some imagined it to be.
Bitcoin may be viewed as trading in the same way that some of the top IT companies listed in the US high-growth index. A 40-day comparison of Bitcoin and the US-listed stock Nasdaq benchmark technology index showed a similarity of 0.66.