Realized Losses Spike as Bitcoin Inflation Hedge Properties Are Questioned
Martin Young - BeInCrypto
Both realized and unrealized losses have spiked for Bitcoin holders while detractors continue to question its properties as a hedge against inflation.
According to on-chain analytics provider Glassnode, Bitcoin realized losses have spiked to their third highest levels in history. A realized loss is when the asset is sold for more than it was purchased for.
This is slightly different from an unrealized loss which is when the holder has yet to sell, but the price is below the purchase price.
According to the chart, realized losses spiked higher during the volatile early Bitcoin trading days in 2011 and 2013. There was another spike during the March 2020 pandemic-induced market crash.
In June, Glassnode reported three consecutive days with the largest USD-denominated realized losses in Bitcoin history with more than $7.3 billion of outflows. The updated chart was posted on crypto Twitter on July 14.
Huge spikes in realized losses being taken in #Bitcoin. This is the 3rd biggest puke of all-time pic.twitter.com/WdFt8zCZcw— J.C. Parets (@allstarcharts) July 13, 2022
Is BTC an inflation hedge?
The suppressed price action has caused many market observers to question Bitcoin’s frequently touted properties as an inflation hedge. It certainly isn’t behaving like one at the moment having lost 70% in a year that has seen inflation surge to four-decade highs.
On July 13, the U.S. government announced that the consumer price index (CPI), which is a gauge for inflation, soared to 9.1%, beating expectations of 8.8% and marking the biggest yearly increase since 1981.
Economist Alex Krüger labeled the CPI announcement as the “Crypto Pain Index” as Bitcoin dumped 4.36% in the hour that followed the announcement. Others began to question why.
Bitcoin is the world’s best inflation hedge. Down sharply after the CPI number came in hotter than expected. pic.twitter.com/6I5SebwXod— Dr. Parik Patel, BA, CFA, ACCA Esq. (drpatel.eth) (@ParikPatelCFA) July 13, 2022
Higher inflation in any country is bad news for all high-risk assets as it erodes market sentiment and purchasing power. Therefore, it would be logical to conclude that BTC is not behaving as an inflation hedge at the moment. If anything, stablecoins have been seen as a better lifeboat, especially in countries with the highest inflation such as Argentina, Turkey, Brazil, and Venezuela.
More pain before gains
ShapeShift founder Erik Voorhees was one of the few backing Bitcoin at a time when it’s on the ropes, commenting:
“People dunking on #Bitcoin because it hasn’t outperformed dollars during this high inflation are forgetting one important thing. Bitcoin will go back up. The dollar only goes down.”
At the time of press, Bitcoin prices had recovered their post-inflation news puke and had returned to $20,000, however, the short-term macroeconomic outlook is still very grim.
With Federal Reserve rate hikes expected later this month, the likelihood of Bitcoin prices falling even further is a strong one.
The post Realized Losses Spike as Bitcoin Inflation Hedge Properties Are Questioned appeared first on BeInCrypto.
View full text