Bitcoin investors are facing a challenge as inflation data cools, questioning the asset’s value proposition. The Consumer Price Index fell to 2.4% in January, but Moody’s chief economist warns that inflation may look better on paper than in reality. Bitcoin is often seen as a hedge against inflation due to its finite supply of 21 million coins.

Bitcoin sentiment hits multi-year lows as the Crypto Fear & Greed Index shows extreme fear. The cryptocurrency is down 28.14% over the past month, trading at $68,850. Investors turn to Bitcoin as a perceived riskier asset to protect their purchasing power when fiat currencies decline.

Bitcoin may experience short-term volatility due to deflationary forces and US dollar devaluation. The Federal Reserve is expected to expand the money supply to combat inflation, potentially increasing Bitcoin’s value. The US dollar index is down 2.32% over the past month, trading at $96.88. Bitcoin’s ‘biggest bull catalyst’ would be Saylor’s liquidation, according to Santiment founder.

Read more at Cointelegraph: Bitcoiners Face Test As Inflation Cools: Pompliano