15.07.202114:52 Forex Analysis & Reviews: Is Bitcoin a defender against inflation or a bubble?

The bitcoin exchange rate has slightly decreased recently, and the bears have again taken up their favorite business - trying to gain a foothold below the level of 32,400.

Since the beginning of this month, bitcoin volatility has remained fairly calm between $32,000 and $34,000. Many traders were waiting for the market reaction to the US inflation data, as it was a real test for a trading instrument, which is considered as a hedge against inflation. Higher costs associated with the opening of the US economy after the pandemic have led to a sharp increase in prices. The last time such a jump was observed was in 2008.

According to official data, the US CPI rose 0.9% in June this year, while economists had forecast growth of only 0.4%. The growth was due to a jump in spending aimed at restoring the American economy after the coronavirus pandemic. Over the past year, inflation has risen by 5.4%, which also significantly exceeded the forecasts of economists, who believed in the growth of 4.9%. The underlying effect continues to grow after inflation started to rise in June last year.

But as we can see, against the backdrop of rising inflation in the United States, bitcoin has not shown strengthening, although enthusiasts argue that the first cryptocurrency is insurance against rising consumer prices and ultra-soft monetary policy, which consists in printing money in huge volumes. Those who believe in bitcoin and its protection against inflation think this way: unlike the US dollar or any other traditional currency, bitcoin is designed for a limited supply, so it cannot depreciate.

However, there are those who are not yet very confident that bitcoin and other cryptocurrencies can be viewed as gold, which has long had the status of an inflation-protective asset. The logic is this: the world of cryptocurrencies is just beginning to emerge and the markets are subject to too high speculative pressure. Opponents of bitcoin, who do not consider it to be insurance against inflation, also advocate this thesis.

The fact of the fall of bitcoin in May and the beginning of an active struggle against the industry on the part of China was enough for speculators to escape from the market in all possible ways, which once again proves the correctness of those who do not yet strongly believe in bitcoin as a tool to protect against inflation. Bitcoin does not have a high payment potential, since settlements with it are carried out at a minimum level. High fees and transaction delays due to the government's fight against Chinese miners are also not adding to bitcoin's attractiveness at the moment.

But even despite this, some firmly believe in the prospect of cryptocurrencies and the development of this technology in the future.

Ark Investment Management's Cathie Wood says that concerns about the environmental impact of bitcoin, which were not the last reason for the crypto market crash in May, are unlikely to hinder it in the long term. In her opinion, more and more miners are now switching to renewable energy sources, which in the future will only contribute to the strengthening of the market.

And in some ways Wood is right, since many miners have recently been looking more closely at nuclear power, and it is quite possible that soon there will be quite a lot of offers on the markets in this direction, there would be demand. Amid a heated debate over environmental concerns over bitcoin mining, two companies in the industry have already said they have an answer to mitigate some of the negative impacts of bitcoin mining. The answer is nuclear power.

Energy startup Oklo Inc. stated that it has partnered with the bitcoin mining company Compass Mining. The company noted that the collaboration is aimed at trying to reduce fossil fuel waste emissions from bitcoin mining and diversify the energy sources used by miners.

Energy Harbor Corp., a power company, also recently announced that it has entered into a five-year partnership with Standard Power and will operate Standard Power's bitcoin mining center in Coshocton, Ohio.

As for the technical picture of bitcoin, it has not changed after the weekend. Buyers have real problems with the breakout of the $36,000 resistance, which creates quite a lot of problems for further growth. A breakout of this range will lead to a new upward wave to the upper border of the side channel of $41,100. Only after the breakout of this range can we seriously talk about a new wave of BTC growth to the highs of $46,700 and $52,000. The bears face a completely different task. First, they need to prevent bitcoin from going above $36,000, and then somehow break below the support at $32,400, which was formed at the end of last month. Only after that can one expect a decline to the area of the lower border of the side channel at $30,000. A breakdown of this level will collapse the rate to the lows at $25,700 and $21,650. It is still too early to talk about $10,000, but in the future, this level can become the real bottom of the cryptocurrency market.