Both realized and unrealized losses for bitcoin holders have increased, while opponents continue to question its assets as a hedge against inflation.
According to on-chain analytics provider Glassnode, bitcoin realized losses have reached its third highest level in history. A real loss occurs when the asset is sold for more than it was bought for.
This is slightly different from an unrealized loss which occurs when the holder has yet to sell, but the price is less than the purchase price.
According to the chart, the losses realized during the volatile early bitcoin trading days in 2011 and 2013 grew higher. There was another spike in March 2020 during the pandemic-induced market crash.
in June, Glassnode told The outflow of more than $7.3 billion occurred three days in a row, with the largest real loss in USD-denominated currency in bitcoin’s history. The updated chart was posted to Crypto Twitter on July 14.
Is BTC an inflation hedge?
The suppressed price action has led many market observers to question bitcoin’s often touted asset as an inflation hedge. It certainly isn’t behaving the same at the moment, having slashed 70% in a year that has seen inflation hit a four-decade high.
On July 13, the US government announced that the Consumer Price Index (CPI), a gauge for inflation, rose to 9.1%, beating expectations of 8.8% and marking the biggest annual increase since 1981. .
Economist Alex Kruger label Declaring the CPI as Bitcoin’s “Crypto Pain Index” fell 4.36% in the hours following the announcement. Others began to question why.
High inflation in any country is bad news for all high risk assets as it impairs market sentiment and purchasing power. Therefore, it would be logical to conclude that BTC is not currently behaving as an inflation hedge. 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 gain
ShapeShift founder Eric Voorhees was one of the few backed bitcoin at the time it was on the ropes, Comment,
“People are getting stung on #Bitcoin because it hasn’t outperformed the dollar during this high inflation, forgetting one important thing. Bitcoin will back up. Dollar only goes down.”
At press time, the bitcoin price had recovered from post-inflation news and was back at $20,000, however, the short-term macroeconomic outlook remains very grim.
With the Federal Reserve expected to hike rates later this month, the potential for further downside in bitcoin prices is strong.