Journalist
Posted:
- Amid rising 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 past two years it has become clear that Bitcoin [BTC] performance and that of the crypto market as a whole are correlated with the S&P500. As such, rising economic concerns have negatively impacted BTC’s performance.
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Based on the above, many people believe that Bitcoin may be losing the plot it was created for. A hedge against inflation.
However, Vero Data founder Will Clemente still believes that Bitcoin can still become one of the best assets to hold for the long term, especially as the US economy appears to be heading deeper into debt.
Clemente noted in a recent statement that the only way the U.S. can avoid a financial crisis is by achieving higher economic growth than its debt burden. However, debt creation in the US has grown faster than economic growth. According to the analysis, debt and humiliation may be the reason it makes sense to hold Bitcoin.
Despite being down almost 70% from 2021 highs, there is still a good chance that Bitcoin will succeed.
With the market moving sideways, Bitcoin volatility nearing an all-time low, and me losing my mind, I decided to put together a few thoughts on why:
It is common knowledge that Bitcoin… pic.twitter.com/kNo9RBvyiR
— Will Clemente (@WClementeIII) September 19, 2023
According to Clement, the devaluation of the currency, combined with rising inflation, constitutes a strong argument for the need for an alternative monetary system. It makes it easier for people to embrace cryptocurrencies, and even more so for Bitcoin.
This is because there is still a perception that Bitcoin is still a viable hedge against inflation in the long term.
Bitcoin defies sluggish market conditions
Inflation and mounting debt are likely to continue to weigh heavily on the US economy, and by extension the rest of the world. If this continues, demand for Bitcoin will continue to rise.
We can see evidence of this in larger time frames. For example, the number of addresses holding at least 0.01 BTC has grown steadily over the past twelve months.
Source: Glassnode
By the same metric, the number of new addresses that joined this category in the last twelve months is over 1.71 million addresses. Moreover, the amount of Bitcoin in foreign exchange reserves has also decreased.
Source: CryptoQuant
Based on the above findings, we see that Bitcoin has maintained healthy long-term demand. Nevertheless, the country remained subject to short-term headwinds.
Read Bitcoin’s [BTC] Price forecast 2023-2024
The latest concerns revolve around the potential impact of interest rate changes on Bitcoin’s price action. This is because the interest rate determines the accessibility of liquidity.
However, Bitcoin is likely to overcome these long-term headwinds and possibly overcome its correlation with the S&P500, especially once the next bullish phase arrives.