This chart states that Bitcoin is a leading indicator of inflation
Pumped golden balloon shaped by bitcoin sign with the growing bar graph on the pink wall. (3d rendering)
A new price chart comparing Bitcoin (BTCUSD) to the US Consumer Price Index (CPI) may suggest that BTC is a leading indicator of inflation.
And if what the chart signals is accurate, inflation could be back in a big way.
Does Bitcoin Lead to Rising and Falling Inflation?
Back in 2020, the Bitcoin price set new all-time highs amid a growing inflation hedge story and an unprecedented increase in the money supply. Other cryptocurrencies followed.
The idea was that the limited supply of BTC would cause the asset to strengthen against the dollar’s declining purchasing power. “The fastest horse in the race against inflation” and “gold in the 1970s,” Paul Tudor Jones famously said.
Except the US Federal Reserve started raising interest rates aggressively and a deflationary phase sucked the value out of just about every asset, including Bitcoin. It also managed to moderate inflation slightly, which has since declined.
Not only did pundits claim BTC had failed to be an inflation hedge, they said it was dead (again). Adherents of that narrative ended up with egg on their laser-eyed faces. However, a new chart comparison says these people weren’t wrong, they were just early, and so was Bitcoin.
BTCUSD Versus CPI | Source: Elliott Wave International
Crypto Pro compares BTC to CPI
In a new chart shared by Elliott Wave International as part of a free video hosted by Crypto Pro Service analyst Tony Carrion, Bitcoin appears to be a leading indicator of inflation.
Bitcoin rose ahead of the consumer price index (CPI) which increased from several months to a year. The CPI is a central measure of inflation in the United States. The top cryptocurrency also fell hard ahead of inflation cooling late last year. Now Bitcoin is turning back upwards. Could this be a sign that inflation is once again following suit?
If so, inflation could start to rise in several months to a year now that Bitcoin is gaining momentum. But if the leading and lagging correlation between BTC and the Consumer Price Index matters and remains, a massive Bitcoin rally to new all-time highs will eventually lead to skyrocketing inflation at record levels.
Elliott Wave International regularly releases exclusive cryptocurrency updates and analysis as part of their Crypto Pro Service. Tony Carrion is an analyst and educator from Crypto Trader’s Classroom. To learn more, check out the official website.
