A new price chart comparing Bitcoin (BTCUSD) to the US Consumer Price Index (CPI) may show that BTC is a leading indicator of inflation.
And if the chart signals are accurate, inflation could return in a major way.
Does Bitcoin Cause Inflation to Rise and Fall?
Back in 2020, the price of Bitcoin set an all-time high amid growing inflation hedge narratives and an unprecedented increase in money. Other cryptocurrencies followed.
The idea is that a limited supply of BTC should cause the asset to appreciate with the declining purchasing power of the dollar. “The fastest horse in the race against inflation” and “the gold of the 1970s,” Paul Tudor Jones was famous for.
Unless the US Federal Reserve starts raising interest rates aggressively and the deflationary phase sucks the value out of almost all assets, including Bitcoin. It is also possible to slightly tame inflation, which began to decline.
Not only do pundits claim BTC has failed as an inflation hedge, they say it’s dead (again). The proponents of the narrative ended up with egg on their faces with laser eyes. However, a recent chart comparison says that these guys aren’t wrong, it’s just early, and so is Bitcoin.
BTCUSD Versus CPI | Source: Elliott Wave International
Crypto Pro Compares BTC Against CPI
In the new chart shown by Elliott Wave International as part of a free video hosted by Crypto Pro Services analyst Tony Carrion, Bitcoin appears to be a leading indicator for inflation.
Bitcoin rally ahead of the Consumer Price Index (CPI) increase by several months to a year. The CPI is the main measure of inflation in the United States. Top cryptocurrencies also fell ahead of the cooling of inflation late last year. Now Bitcoin is back up. Could this be a sign of inflation again?
If so, inflation could start to rise in a few months to a year now that Bitcoin is rising. However, if the leading and lagging correlation between BTC and the Consumer Price Index means something and remains, the massive Bitcoin rally to a new all-time high will ultimately lead to soaring inflation at record levels.
Elliott Wave International regularly releases exclusive cryptocurrency updates and analysis as part of its Crypto Pro Service. Tony Carrion is an analyst and educator of the Crypto Trader Class. To learn more, check out the official website.