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Bitcoin's Perfect Storm: Institutional Investors and Surging Inflation in July

Consumer prices grew 0.6 percent in July in the U.S., signaling strength may be returning to consumer spending as many Americans return to work.

Investors, Corporations Hedge Surging Inflation With Bitcoin

Key Takeaways

  • Consumer prices rose 0.6% in July.
  • The CPI recorded its largest monthly jump in three decades.
  • Inflation remains historically low, but is trending upwards quickly.

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Inflation surged in the U.S. last month, suggesting deflationary pressures resulting from lockdown measures have subsided. Time to long Bitcoin?

Stimulus Measures to Usher in Inflationary Era?

The United States recorded the largest monthly jump in the consumer price index, the CPI, in July. This index measures the cost of consumer goods like transportation and food. It is often used as a data point for measuring inflation and deflation.

Up 0.6 percent, inflation exceeded expectations as most economists had predicted growth of 0.3 percent.

According to Bloomberg, core CPI (which excludes food and fuel) grew 0.6 percent after a jump of 0.2 percent in June. That figure is the largest monthly rise in three decades.

Inflation now stands at an annualized rate of 1.6 percent, a four-month high after June posted core inflation of 1.2 percent. The movement in prices comes after the central bank promised open-ended asset purchases to prop up the American economy. 

The Fed’s actions and the government’s fiscal measures combined have pumped a staggering $6.2 trillion into the world’s largest economy this year. 

As Peter Boockvar, chief investment officer at Bleakley Advisory Group, told clients in a note:

“We are now in QE infinity, again.”

Time to Buy Bitcoin?

Concerned about the debasement of the dollar, several high-profile investors have turned to Bitcoin to hedge against inflationary risk. Paul Tudor Jones described the monetary policy interventions as the “Great Monetary Inflation.” 

The founder of Tudor BVI announced earlier in the year that his fund was investing in Bitcoin futures. Jones said:

“I am not an advocate of Bitcoin ownership in isolation, but do recognize its potential in a period when we have the most unorthodox economic policies in modern history.”

Corporations are also looking to Bitcoin for certainty against fiat debasement. The software company, MicroStrategy, announced plans to invest $250 million of its capital into precious metals and Bitcoin to “maintain a healthy capital base” as “the dollar has been weakening.” 

Despite 30 million unemployed Americans still relying on cash handouts, stimulus measures appear to have created inflationary pressures.

If the trend continues, the time to long Bitcoin as a hedge may well be nigh.

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