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Comment by saurik | Hacker News Reader

> It's not supposed to be doing this.

Is it really not? Both stocks and cryptocurrencies act as inflation hedges against the central bank.

It’s really not. It is highly correlated with high risk assets and growth shares. It is anything but an inflation hedge, which is why it has been plunging as inflation rises and will fall more if interest rates rise.

If it were an actual currency things might be different, but instead it’s just another high risk speculative asset.

Just because BTC is temporarily correlated with risk assets, that doesnt mean it wont change.

Also, it's better to look at charts by starting at the beginnning of this 4 year cycle, dont pick out a bearish 6 month period and falsely claim BTC fails the inflation test. Short termism and Bitcoin's monetary policy are incompatible.

It certainly fails the inflation test without any doubt today.

You seem to be saying that it might pass it in the future.

Wrong, real inflation has been rising at an alarming rate for more than a decade, it didnt start in Q4 of 2021.

If you choose to measure BTCs performance poorly (3-6 month windows), you are just feeding yourself a false conclusion since Bitcoin had a 5,000,000x return over the past decade.

You’ll need evidence for that, and a way to disambiguate Bitcoin’s performance as an inflation hedge from the speculative bubble.

> it did a 5,000,000x plus return in that time

Then it is self evidently not an inflation hedge.

BTC's monetary policy makes it an inflation hedge regardless of what humans are doing with it, the cycles just take 4 years to play out. The evidence is literally in the code.

No need to complicate things, just focus on 2 key questions...

1. Is the BTC supply inflation rate lower than the US dollar’s (and other fiat currencies)?

2. Will it be lower for the forseeable future?

That will give you the simple answer you are looking for...both answers are 'yes' btw.

Price and supply are independent. Bitcoin isn’t a currency. It’s a speculative asset. It doesn’t matter whether it is inflationary within its own realm, so these factors tell us nothing at all.

What matters is whether the speculative asset acts like an inflation hedge.

Spoiler: it does not. It acts like a speculative bubble.

Wrong. Monetary policy is the key here. Price discovery, volatility, reflexivity, add noise to the procession/price-chart but over any 4 year period the fundamentals matter. One would have to be insanse to claim btc doesnt act like an inflation hedge, it literally averages approx 200% return every year, over any 4 year period.

Gold is called an inflation hedge by many confused people, compare its performance to btc over the last 10 years and tell me which performs better in the face of fiat inflation.

>Price and supply are independent

Wrong. Price is literally discovered by supply vs demand.

Say 5 billionaires want to buy coin-x and the max circulating supply is 1 coin... When the bidding war starts, are price and supply independent?

I dont think you understand the topic we are discussing here, so I will move on.

Your argument seems to be that Bitcoin’s price has gone up a lot over the last decade, therefore it must be a hedge.

What you are not seeing is that over that time, every one of the promises made about Bitcoin’s utility has been systematically disproven, which is why it has now stalled.

Past performance is no predictor of future gains, as they say.

Here’s another question to focus on:

If it is mostly used to speculate, not transact, does the supply matter at all to the price?

Both cryptocurrencies and stocks are traded with leverage these days, and central banks control the price of leverage. So, if central banks decide to start raising interest rates, asset prices will go down because leveraging becomes more expensive.

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