WASHINGTON (Dispatches) -The value of Bitcoin rose after a new report found that U.S. consumer prices are growing at the fastest rate since 1982.
The cryptocurrency climbed 4.4% to $50,101 after the report on inflation became public. This surge is also a recovery from last weekend when the coin dropped 21%.
Bitcoin has been promoted in the past as a hedge against inflation, partially because there are a finite amount of its tokens in existence. Hedges are investments that counter risk– which in this case would be the effect inflation may have on the economy.
“Bitcoin is still seen as an inflation hedge, especially for younger investors,” said Matt Maley of the trading firm Miller Tabak + Co. “Since it has few restrictions right now, it is seen as a flight to safety asset for some investors.”
But some have also argued against this notion, questioning whether the assumptions of Bitcoin’s value storage hold up under closer scrutiny:
“If Bitcoin is ‘digital gold’ and gold is an inflation hedge, then it follows that Bitcoin is too, right? Unfortunately, there is no evidence to back this up, and even the relationship between inflation and gold has been tenuous over the years,” Noelle Acheson of Genesis Trading wrote in a report. “Longer term, however, gold has more than held its value while fiat currencies have declined; Bitcoin could end up doing the same.”