Opinion: Bitcoin is no longer a hedge against inflation

One of the main ideas behind bitcoin is that it protects against inflation, which means that its value will remain stable over time — the amount of cryptocurrency is limited to 21 million coins, which creates a shortage as demand for the asset grows.

However, according to analysts from Bank of America, bitcoin is no longer able to cope with the task of hedging inflationary risks. Instead, the No. 1 cryptocurrency is traded as a regular risky asset with a surprisingly tight correlation to the stock market, as we have already written about earlier.

In today’s macro environment, the stock market and bitcoin are practically synchronized. For example, after the Federal Reserve announced on Thursday that it would raise interest rates by half a percent, the value of bitcoin plummeted along with stocks in asell-off that continues today. Analysts expect this correlation to continue in the near future.

Despite the fact that Cryptocurrencies are often compared to digital gold, there has been no correlation with real gold over the past year, and it has even reached negative levels.