Journalist
Posted:
- Amidst soaring debt and inflation, Bitcoin could become a successful hedge.
- The king coin’s data suggested that it was on a healthy long-term growth trajectory.
Over the last two years, it has become apparent that Bitcoin’s [BTC] performance and that of the crypto market at large is correlated with the S&P500. As such, rising economic concerns have had a negative impact on BTC’s performance.
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Based on the above, many people feel that Bitcoin might be losing its plot for which it was created. A hedge against inflation.
However, Vero Data founder Will Clemente still believes that Bitcoin could still emerge as one of the best assets to hold long-term, especially as the U.S. economy looks to be diving deeper into debt.
Clemente noted in a recent statement that the only way for the U.S. to avoid a financial crisis is to have higher economic growth than debt. However, debt creation in the U.S. has been growing at a faster rate than economic growth. According to the analysis, debt and debasement might be the reason it makes sense to hold Bitcoin.
Despite being down nearly 70% from its 2021 highs, there is still a high likelihood that Bitcoin succeeds.
With the market going sideways, Bitcoin volatility near all time lows, and me losing my mind, decided to compile a few thoughts on why:
It is widely known that Bitcoin… pic.twitter.com/kNo9RBvyiR
— Will Clemente (@WClementeIII) September 19, 2023
According to Clement, the currency debasement coupled with the rising inflation make a strong case for the need for an alternative monetary system. It makes it easier for people to embrace cryptocurrencies, and more so for Bitcoin.
This is because there is still the perception that Bitcoin is still a viable hedge against long-term inflation.
Bitcoin defies slow market conditions
Inflation and spiraling debt will likely continue to weigh heavily on the U.S. economy, and the rest of the world by extension. If that remains the case, then Bitcoin demand will continue rallying.
We can see the evidence of this in larger time frames. For example, the number of addresses holding at least 0.01 BTC has been steadily growing in the last 12 months.
Source: Glassnode
According to the same metric, the number of new addresses joining this category in the last 12 months tallies to over 1.71 million addresses. In addition, the amount of Bitcoin on exchange reserves has also been declining.
Source: CryptoQuant
Based on the above findings, we see that Bitcoin has sustained healthy long-term demand. Nevertheless, it has remained subject to short-term headwinds.
Read Bitcoin’s [BTC] Price Prediction 2023-2024
The latest concerns revolve round the potential impact of interest rate changes on Bitcoin’s price action. This is because interest rates determine the accessibility of liquidity.
However, Bitcoin will likely overcome these headwinds in the long-term and possibly overcome the correlation with the S&P500, especially once the next bullish phase kicks in.