Bitcoin remains on pace for its fourth consecutive weekly decline after a brief bounce triggered by a report showing U.S. inflation accelerated failed to unwind the negative sentiment that has recently gripped digital-asset markets.
The largest cryptocurrency by market value has long been touted as an inflation hedge, in part because of its fixed supply. Bitcoin was little changed after rising as much as 4.4% to $50,101 in New York trading on Friday. The coin has been bouncing around the $50,000 level since a weekend flash crash that saw it tumble as much as 21% on Saturday.
“This is an important threshold and the failure to secure it will likely spook some traders,” Nigel Green, founder and chief executive of deVere Group, wrote in a note. Green said they’re buying on the dip.
Bitcoin reached a record of almost $69,000 on Nov. 10. It has gained about 70% this year. Ether, which is also coming off an all-time high set last month, declined for a second day.
Crypto proponents have long argued that Bitcoin and other digital assets, on account of their being an idiosyncratic asset class, could act as hedges against swings in other areas of the financial market. Only 21 million Bitcoin will be put into circulation under the computer protocol that governs issuance, though that figure isn’t expected to be reached for several decades.
“Bitcoin is still seen as an inflation hedge, especially for younger investors,” said Matt Maley, chief market strategist for Miller Tabak + Co. “Since it has few restrictions right now, it is seen as a flight to safety asset for some investors.”
Many notable Wall Street investors and analysts have bought into the idea of using cryptocurrencies as a hedge against rising prices. Veteran hedge fund manager Paul Tudor Jones has said in the past that he likes it as a store of wealth. Meanwhile, MicroStrategy Inc.’s Michael Saylor said the Federal Reserve’s relaxing of its inflation policy helped convince him to invest the enterprise-software maker’s cash into Bitcoin.
#Inflation impairs our economy like #Inflammation impairs our anatomy. #Bitcoin
— Michael Saylor (@saylor) December 10, 2021
The consumer price index increased 6.8% last month from November 2020, according to Labor Department data released Friday. Those watching Bitcoin’s charts closely noted that its gains accelerated following the release of the data.