Bitcoin loses its lustre as a hedge against inflation
Cryptocurrency s value down 40pc in the past month despite a spike in inflation
1 June 2021 • 12:19pm
Bitcoin’s status as “digital gold” has been dealt a serious blow after the recent cryptocurrency rout coincided with a spurt of inflation.
In May, Bitcoin fell from $58,000 to $35,600 - a 39pc decline - while inflation rose suddenly in Britain and the United States. Gold moved in the opposite direction to the cryptocurrency, rising 7pc in May to just over $1,900 an ounce.
Bitcoin advocates argue that it has similar characteristics to gold and should perform well when inflation rises.
Inflation is coming – here s how to fight back and protect your money
Economists are forecasting inflation to reach 5pc in 2022
Energy costs were the biggest contributor to rising prices
We are about to enter a period of higher inflation as pent-up demand is unleashed after 15 months of restrictions, economists have warned.
What has been obvious on investment trading screens since the start of the year, as commodity prices rose and bond prices fell, will soon start to affect consumers when they go to the shops, pay their energy bills and plan their retirement, experts fear.
Inflation figures released this week showed the annual rate of price increases more than doubled between March and April as the Consumer Price Index rose from 0.7pc to 1.5pc. A jump in energy costs was the main contributor thanks to a rise in the price of oil.