Yesterday Bitcoin managed to take the $28,000 level. This happened immediately after the publication of the US Consumer Price Index, or so-called CPI. U.S. inflation rose by 4.9 percent on a year-over-year basis, while experts were betting on 5 percent. And since inflation was lower, this allows crypto investors to be cautiously positive.

Still, the lower CPI figure hints that the Fed will finally stop raising the benchmark interest rate. And that will create conditions for the economy to grow, because borrowing will then stop getting more expensive.

Alas, the cryptocurrency market then slumped. Today, the situation with the top coins by capitalization looks like this.

Is Bitcoin worth buying?

The outlook for cryptocurrencies was highlighted in a new press release from S&P Global, which representatives of the agency shared with CoinDesk news outlet. Here’s how they summarised the potential of crypto in the medium-term future.

In theory, crypto-assets could become a hedging tool against inflation. Some argue that crypto is in demand in an environment of high interest rates and high inflation, as it will become a means of capital accumulation. We believe that the history of the crypto market is still too short to prove this hypothesis.

It is fair to say here that since the beginning of 2023, Bitcoin has produced excellent growth of at least 70 per cent, outperforming most other popular assets by a corresponding margin. Moreover, during the collapse of major US banks like Silicon Valley Bank in March, the cryptocurrency also rose in value. The events of the past few months have therefore proven BTC's ability to act as a risk mitigation tool due to the imperfections of the traditional economy.

Generally, Bitcoin is considered to be a means of capital accumulation, because it is similar to gold – one of the most secure investments with a thousand-year history. As in the case of the precious metal, the maximum supply of BTC is limited, on top of that, the issuance of the digital year is cut in half approximately every four years through a halving process.

Just as importantly, the current number of Bitcoins in circulation can be checked at any time. At the same time, gold stocks are questionable, meaning that the supply of the precious metal in reality may not be at all what it is supposed to be.

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The money supply of traditional currencies grows regularly, due to the constant printing of money by countries’ central banks. Generally, inflation within controlled limits is not considered to be a bad thing in an economy, as it promotes it. However, from an investor’s perspective, currencies lose out to crypto as they continually depreciate while Bitcoin and other popular digital assets increase in value over the long term.

However, data from a recent agency study shows that the correlation – that is, the relationship – between the agency’s daily cryptocurrency index returns, called S&P BDMI, and US two-year and ten-year inflation expectations is just 0.10 points. At the same time, the correlation between changes in this index’s yield over the past three months and expectations for inflation over a ten-year period shows no definite pattern at all.

In other words, there is little correlation between the crypto market and inflation expectations. If there were really a strong correlation between the two factors, the aforementioned correlation would not be lower than 0.75. And that would be the case when analysts could confidently argue that digital assets can protect investors from the imperfections of the global economy.

Gold, on the other hand, has been strongly correlated with US inflation since 2013. Here’s a quote from analysts on the subject.

There is evidence of Granger causality between the ten-year break-even inflation expectations index and the S&P GSCI Gold Index at 95 per cent. This statement does not work in relation to Bitcoin.

Granger causality proof is a statistical hypothesis test in econometrics. Simply put, this indicator displays the existence of causal relationships between different aspects of the economy. Analysts have found that there is far more correlation between gold and inflation than there is between the same inflation and Bitcoin.

At the same time, the crypto market is more inclined to move in the opposite direction to US two-year bond yields. This is clearly visible in the chart below.

Although we think it is important to note Bitcoin’s yield compared to gold over a long period of time. If you had bought BTC for just $1 in October 2009, today that amount of coins would be worth $35.7 million. At the same time, a similar investment in gold would have yielded 90 cents.

Well, a similar return on BTC would definitely be enough to fight off any effects of inflation as well as the ability to survive any financial crisis.

The history of Bitcoin trading with more or less noticeable liquidity is only a few years old, because derivatives on the main cryptocurrency appeared not so long ago. So in the end, analysts simply do not have enough data to confirm or deny the dependence of BTC’s value on certain aspects of the traditional economy.


So far, analysts do not seem confident about Bitcoin's ability to protect ordinary people from inflation, given the paucity of data. However, even in 2023, BTC has already performed better than many investment vehicles - especially when it comes to popular bank stocks. That's why it's really worth taking the time to get to know blockchain-based digital assets. It's still heading towards becoming the future of money, so it's an opportunity not to be wasted.