Why Is Bitcoin Rising As Stocks Decline?

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Last Updated on 6 October 2021 by CryptoTips.eu

Jeroen Kok

Jeroen is one of the lead copywriters on Cryptotips.eu and discusses all recent events in the crypto market. This includes news updates, but also price analyzes and more. He developed his passion for cryptocurrency during the bull run in 2017. He has learned a lot since then. The combination of cryptocurrency and creative writing is perfect for Jeroen and an excellent way to share his knowledge with a wide audience. Find me on LinkedIn / [email protected]
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A somewhat strange phenomenon is taking place in the world of stocks and crypto again. Whereas in the beginning of the year, Bitcoin and stocks seemed to move in tandem, the world’s largest cryptocurrency seems to retake its place as a safe haven again ever since the beginning of Q4.

Stocks fall (and have been doing so since the beginning of September), Bitcoin rises (and has once again taken the $50k frontier this week). So what is happening?

Advertentie.

Hedge against inflation

Because of Bitcoin’s limited supply of 21 million coins, inflation is a non-issue. There is no central bank to print more Bitcoins, no government to decide upon stimulus cheques or ditto extra spending. The amount of Bitcoins that can be mined is set in stone and will remain unchanged, unlike the number of dollars, euros or yens in circulation.

This also means that as prices rise due to the unavailability of certain products (laptops, playstations, new cars, basically anything with chips) or the stronger demand for other products (fuel, gas, heating oil, etc), inflation rises and there is a risk that the Federal Reserve or the European Commission will soon stop its bond buying program, which in turn would send interest rates higher, and stocks lower.

Carlos Betancourt, co-founder of BKCoin Capital, explained:

Inflation is here to stay, and every household is starting to see prices skyrocket for goods and services nationwide. Many savvy investors look for asymmetric opportunities and a hedge against inflation, and there is always one common asset that comes to mind … remember, bitcoin is the only asset that governments or central banks cannot manipulate.

Because of the Chinese Evergrande scandal, stocks have come under pressure in recent weeks. On top of that there is now concern that the Fed will scale back stimulus faster than foreseen. As a result, Bitcoin is seeing renewed interest from Wall Street.

Max Boonen, founder of crypto market-making firm B2C2, commented:

Inflation fears are lifting expectations of the future path of interest rates by the Federal Reserve. As usual, that could weigh on stocks. On the other hand, bitcoin is seen as more insulated against inflation than equities thanks to its fixed supply.

spaxiax / Depositphotos.com