From NasdaqOMX:

After a volatile journey since 2009, Bitcoin’s price soared past $60,000 in 2021, reaching $68,789 by the year’s end. The total cryptocurrency market value also hit an impressive $2.5 trillion. Despite periods of sharp declines, Bitcoin remains the dominant cryptocurrency with a market capitalization of $2.02 trillion, attracting increasing attention from investors.

Despite its popularity as an inflation hedge, Bitcoin’s strong negative correlation with inflation has made skeptics doubt its effectiveness in hedging against rising prices. The cryptocurrency’s prices have been seen to drop as inflation rises, making its reliability as a hedge questionable.

Bitcoin’s volatility remains a defining factor that spurs most of its price movements. It is heavily influenced by market sentiments and speculation, making it more difficult to predict compared to traditional stocks.

Interest rate hikes have also played a significant role in affecting Bitcoin prices. When the Federal Reserve implemented rate hikes to combat inflation, it led to a decline in liquidity in the financial market, causing a further decrease in Bitcoin prices. However, when the Fed eased rate hikes, Bitcoin prices rebounded.

Despite attempts in some countries to make Bitcoin a legal tender, it is still considered a new asset, lacking the recognition of a currency or a commodity. It’s currently used primarily as an investment or asset type, with limited acceptance as a mode of payment.



Read more: Is Bitcoin A Safe Hedge Against Inflation?