A torrid 2022 triggered several criticisms of Bitcoin as a hedge against inflation, but Pompliano cites the asset’s recent surge as evidence of its sturdiness against inflation.
Investor and host of The Pomp Podcast Anthony Pompliano has opined that Bitcoin continues to be the best hedge against inflation in the face of mounting criticism. Pompliano made the comments via Twitter, saying that critics failed to see the bigger picture that was forming underneath.
The serial investor argued that market moves are based on future events rather than past occurrences, which explains BTC’s meteoric rise in 2021. According to Pomp, investors were anticipating a sharp rise in inflation following months of lowering rates and cash injections into the economy.
“Bitcoin was around $10,000 for much of 2020, but we saw it increase to over $60,000 by March 2021. That is a 600% gain in less than a year,” wrote Pompliano. “Although inflation was still low, investors bought it IN ANTICIPATION of inflation coming.”
By November 2021, BTC had soared to its all-time high of over $64,000 while inflation figures were causing a stir in the economy. Pompliano noted that the announcement of the Federal Reserve to combat inflation by increasing rates forced investors to sell off their BTC holdings in exchange for value stocks.
The selloff saw BTC tumble by over 70% of its all-time high, prompting critics to poke holes in its ability to operate as a hedge against inflations. Pompliano noted their position was far from the truth because “you would expect inflation hedge assets to fall in price when the Fed is bringing down inflation”
In the last seven days, Bitcoin’s price has climbed by over 32% to trade at just over the $28,000 mark after months in the doldrums. The surge, according to Pompliano, is simply proof of growing investors’ faith in BTC’s capacity as a worthy hedge against inflation.
With the Feds’ attempt at curtailing inflation falling short of expectation and renewed plans to raise the interest rates, Pompliano thinks the market is running to the relative safety of Bitcoin.
“Bitcoin is responding to the current macro situation. The market is forward-looking and it knows that inflation is going to be higher, and last longer than previously believed,” said Pompliano. “Investors need an inflation hedge again and Bitcoin is the big winner.”