Good times are here? Bitcoin jumped the most in the past 2 weeks to hit a high of $36,000 from the low price of about $31,000. Its price was up 14%, making for the biggest gain since May 24.
At press time, BTC was changing hands at $36,521.
This happened on the back of El Salvador passing a law that recognized the cryptocurrency as legal tender in the country. And while that has spurred up hopes for mass adoption, there are also mounting inflation concerns to tend to that are also playing a part.
Data released by China earlier today showed that the producer price index (PPI) in the country rose 9% last month, making for the biggest year-over-year increase since September 2018. This metric is also known as factory gate inflation.
China’s PPI typically adds to inflationary pressures worldwide, because the country is a major buyer and supplier globally.
As Dariusz Kowalczyk, an economist at Crédit Agricole, notes:
“Rising costs everywhere, in particular in China, will be adding to global inflationary pressures. I think we are going to live with higher inflation globally, and what’s happening in China will contribute to that.”
That promises to be bullish for Bitcoin, which is widely considered an inflation hedge, as the pace of expansion of its supply is reduced by half every four years.
Further, the hashrate of the world’s most popular cryptocurrency has fallen to its lowest level this year, with the decline accelerated since April when many Chinese miners were knocked offline due to a series of coal mining related accidents.
Longer terms, big gains may remain elusive for some time amid concerns that policymakers across the globe might increase interest rates or scale back liquidity boosting asset purchase programs to contain inflation. This is a process known as tapering.
Monetary tightening tends to dilute the appeal of store of value assets like Bitcoin and gold.
In any case, we are living in interesting times.
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