Bitcoin rises back above $36,000 as El Salvador declares it legal tender and inflation concerns persist

2021 03 13T111735Z_1_LYNXMPEH2C07M_RTROPTP_4_CRYPTO CURRENCY BITCOIN TREASURY.JPG
Bitcoin has lost nearly half its value since April.

  • Bitcoin rose back above $36,000 Wednesday, boosted by El Salvador’s move to make the cryptocurrency legal tender.
  • Persistent inflationary pressures may have also encouraged investors to add exposure to the digital asset.
  • Once bitcoin breaks through $38,000, it may signal an upward trend towards $47,000, an expert said.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The price of the world’s most popular cryptocurrency rose back above $36,000 Wednesday, boosted by El Salvador’s historic move in becoming the first country to establish bitcoin as a legal tender. Persistent inflationary pressures may have also encouraged investors to flock to the asset, which some view as an inflation hedge.

Bitcoin rose to $36,840 at around 1:24 p.m. ET Wednesday, rising 17% from the intraday low the previous day. It has lost almost 50% of its value since hitting an all-time high of nearly $65,000 in April.

“This current market pause is not unexpected. Everyone needs time to assess and digest what the community has built,” Paolo Ardoino, CTO of Bitfinex, a cryptocurrency exchange said. “I’m still extremely bullish in the long term about bitcoin and the long-term fundamentals and use cases of the technology.”

Tim Frost, founder of fintech firm Yield, said if bitcoin can break through $38,000, it may signal an upward trend toward its medium-term average of around $47,000 and potentially beyond.

The congress of El Salvador on Wednesday voted in favor of bitcoin becoming legal tender in the country, cheered on by President Nayib Bukele. Once the law passes through the legislative processes, bitcoin will have the same status as the US dollar – the country’s current national currency.

Bitcoin by then will automatically and immediately be converted into US dollars upon use.

Meanwhile, investors are anticipating US Consumer Price Index data on Thursday, which is expected to show inflation picked up faster than April’s pace, which was already the highest reading since 2008. The European Central Bank will also meet the same day.

Several economists including those at Deutsche Bank have said inflation will make a comeback if the Federal Reserve sticks to its current policy of keeping interest rates historically low.

“We expect inflationary pressures to re-emerge as the Fed continues with its policy of patience,” the bank’s economists on Monday said. “It may take a year longer until 2023 but inflation will re-emerge.”

Beyond these, John Wu, president of Ava Labs, the team behind altcoin avalanche, said that as bitcoin becomes more mainstream thanks to institutional adoption, the more closely it becomes correlated to traditional asset classes.

“Bitcoin was the first crypto to feel this impact and begin to recover,” Wu said. “We’re now seeing it ripple through the rest of the crypto markets.”

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Bitcoin rises back above $35,000 as El Salvador declares it legal tender and inflation concerns persist

2021 03 13T111735Z_1_LYNXMPEH2C07M_RTROPTP_4_CRYPTO CURRENCY BITCOIN TREASURY.JPG
Bitcoin has lost nearly half its value since April.

  • Bitcoin rose back above $35,000 Wednesday, boosted by El Salvador’s move to make the cryptocurrency legal tender.
  • Persistent inflationary pressures may have also encouraged investors to add exposure to the digital asset.
  • Once bitcoin breaks through $38,000, it may signal an upward trend towards $47,000, an expert said.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The price of the world’s most popular cryptocurrency rose back above $35,000 Wednesday, boosted by El Salvador’s historic move in becoming the first country to establish bitcoin as a legal tender. Persistent inflationary pressures may have also encouraged investors to flock to the asset, which some view as an inflation hedge.

Bitcoin rose to $35,349 at around 8:14 a.m. ET Wednesday, rising 12% from the intraday low the previous day. It has lost almost 50% of its value since hitting an all-time high of nearly $65,000 in April.

“This current market pause is not unexpected. Everyone needs time to assess and digest what the community has built,” Paolo Ardoino, CTO of Bitfinex, a cryptocurrency exchange said. “I’m still extremely bullish in the long term about bitcoin and the long-term fundamentals and use cases of the technology.”

Tim Frost, founder of fintech firm Yield, said if bitcoin can break through $38,000, it may signal an upward trend toward its medium-term average of around $47,000 and potentially beyond.

The congress of El SalvadorWednesday voted in favor of bitcoin becoming legal tender in the country, cheered on by President Nayib Bukele. Once the law passes through the legislative processes, bitcoin will have the same status as the US dollar – the country’s current national currency.

Bitcoin by then will automatically and immediately be converted into US dollars upon use.

Meanwhile, investors are anticipating US Consumer Price Index data on Thursday, which is expected to show inflation picked up faster than April’s pace, which was already the highest reading since 2008. The European Central Bank will also meet the same day.

Several economists including those at Deutsche Bank have said inflation will make a comeback if the Federal Reserve sticks to its current policy of keeping interest rates historically low.

“We expect inflationary pressures to re-emerge as the Fed continues with its policy of patience,” the bank’s economists on Monday said. “It may take a year longer until 2023 but inflation will re-emerge.”

Read the original article on Business Insider

Billionaire investor Ray Dalio says he’d rather own bitcoin than bonds as inflation surges – and reveals he’s bought some of the cryptocurrency

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  • Ray Dalio said he’d rather own bitcoin than bonds in a CoinDesk interviewed aired Monday.
  • The Bridgewater founder also said he owns “some bitcoin,” the first time he’s ever disclosed a position in the cryptocurrency.
  • Dalio has been bearish on bonds for a while, saying they pay less than inflation.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Billionaire investor Ray Dalio said he would rather own bitcoin than bonds in an interview aired on Monday at the Consensus by CoinDesk 2021 convention.

The Bridgewater Associates founder reiterated his view that the US dollar is on the verge of a devaluation, and he suggested that bitcoin could be an attractive savings vehicle in an inflationary scenario.

“The more we create savings in it, the more you might say, ‘I’d rather have bitcoin than the bond,'” Dalio said. “Personally, I’d rather have bitcoin than a bond.”

The billionaire investor has been bearish on bonds for quite some time, saying that the financial instruments pay less than inflation.

“I have some bitcoin,” Dalio also said during the interview, which was recorded on May 6. The investor didn’t say how much he owned.

Bitcoin rebounded as much as 15% on Monday to trade around $38,683 per coin after a vicious sell-off over the weekend.

He added that bitcoin’s greatest risk is its success. If it becomes a larger asset class and starts to pose a real threat to others like bonds, that could prompt a regulatory crackdown that could hinder the cryptocurrency. He said right now, bitcoin isn’t a true threat because it’s still small relative to other assets. The total value of bitcoin is slightly over $1 trillion, while the value of US bonds is about $23 trillion, according to Dalio.

In March, Dalio said that the government could ban bitcoin altogether if it becomes too successful.

The investor was skeptical about the cryptocurrency as recently as November, but he began to warm-up to the idea of bitcoin at the start of 2021. In an investor letter, he said that bitcoin is “one hell of an invention,” and said there exists a possibility that bitcoin and other cryptos could become an alternative gold-like store of value.

Read more: ‘Wolf of All Streets’ crypto trader Scott Melker breaks down his strategy for making money using ‘HODLing’ and 100X trade opportunities – and shares 5 under-the-radar tokens he thinks could explode

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Bitcoin bulls have long claimed the cryptocurrency is an inflation hedge. But recent price swings have challenged that idea.

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  • Bitcoin bulls have long argued that the cryptocurrency is a hedge against inflation, particularly because of its fixed supply.
  • But bitcoin tanked this past week after stronger-than-expected inflation data when it theoretically should’ve gained.
  • We spoke to one bitcoin expert who isn’t concerned about bitcoin’s recent downward movement – and who said it’s still undervalued as an inflation hedge.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Fears of rising inflation came to a head on Wednesday when key data came in significantly higher than economists expected. Bitcoin, touted by some of its biggest supporters as an inflation hedge – because it has a finite supply, unlike the dollar – didn’t rise in response. It instead slumped around 7% on the day.

Headline inflation data as measured by the Consumer Price Index rose 4.2% year-over-year in April, the fastest rate since 2008, while core inflation rose 0.9% in the largest monthly increase for the core index since 1982. The Dow shed nearly 700 points Wednesday.

Meanwhile, alleged inflation hedge bitcoin dropped below $50,000 to its lowest level in nearly three weeks.

The day that inflation fears hit a boiling point would have been bitcoin’s time to shine as the hedge against devalued, government-backed money its supporters claim it to be. With its fixed supply of 21 million bitcoin, the cryptocurrency is meant to protect against reckless central bank policy and helicopter money distributed by governments during the pandemic.

But as inflation concerns built in the weeks leading to Wednesday’s crescendo, bitcoin was unable to break out past new records. It has slumped 24% in the last month, and Elon Musk’s tweet about its environmental impact following the inflation print didn’t help.

The world’s most popular cryptocurrency may not be the hedge it is claimed to be, and its sensitivities to everything from local restrictions on bitcoin mining to Elon Musk’s latest tweets show that the coin is really treated by market participants as a risk asset and a vehicle for speculation.

Read more: A 29-year-old crypto billionaire who’s perfected digital-currency arbitrage shares 2 tips for investors looking to get started in trading – and explains why ether is unlikely to surpass bitcoin

Still, some bull are steadfast that bitcoin will get its day in the sun as inflation rises.

Dan Held, head of growth at cryptocurrency exchange Kraken, doesn’t think bitcoin’s recent price movements indicate it’s not a good inflation hedge, and said it’s developed a floor at the current price of $45,000-$50,000.

“I don’t think there was one singular catalyst that would either have pushed bitcoin up or down that’s inflation related,” he told Insider. “Bitcoin moved so intensely upwards earlier this year, this was sort of a bitcoin catching its breath before another big leg up.”

Held said bitcoin is still undervalued as an inflation hedge, especially considering that at a $1 trillion market capitalization, its much smaller than other assets that are traditionally seen as inflation hedges like gold and real estate.

Read the original article on Business Insider