Inflation at 30-Year High – Cryptocurrencies Run Bullish to Earn Value

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As inflation increases, investors become more attracted to assets such as Bitcoin. On Wednesday, the price of Bitcoin climbed to its highest level ever.

Investors continued to pile into Bitcoin (BTC) and other cryptocurrencies on Wednesday, as inflation in the United States threatens to depress prices.

According to Coingecko, the cryptocurrency market capitalization – an important barometer of the health of the digital asset class – reached $3.11 trillion. Over the past two weeks, the asset class has grown by a cumulative 20%.

In the morning session, Bitcoin’s price spiked above $69,000, setting a new all-time high. In addition to Bitcoin (BTC), Ethereum (ETH) also reached new highs, peaking at around $4,870, according to Cointelegraph Markets Pro.

Proponents of Bitcoin say that BTC is the best “hard money” alternative to fiat currencies because it is perceived as a hedge against inflation and devaluation. In comparison to gold, the most widely regarded inflation hedge, bitcoin has outperformed it by over 130% year-to-date.

Concerns about inflation were rampant Wednesday after the Labor Department reported another large uptick in consumer prices. The United States consumer price index, a broad measure of inflation, rose 6.2% annually in October, the highest since 1990. So-called core inflation, which strips away volatile goods such as food and energy, increased by 4.6%, the largest annual rise since 1991.

With inflation vastly overshooting the Federal Reserve’s target of around 2%, calls to end the central bank’s stimulus programs have grown louder in recent months. Last week, the Federal Open Market Committee said it would begin scaling back its monthly bond purchases beginning in mid-November, but that it would let leave interest rates at record lows indefinitely because high inflation would prove “transitory.”

Interestingly, Fed Chair Jerome Powell has seemingly altered his definition of “transitory” inflation to mean that elevated prices are here to stay and that future price increases won’t be as dramatic as the recent gains.

Even by the Fed’s preferred measures, consumer prices are rising rapidly. | Source: FRED

To be sure, the Fed’s preferred measure of inflation — the core personal consumption expenditure index — is well below the headline CPI figure. Core PCE has averaged 3.6% annually over the last four months of reporting ending in September.