100 sats \ 2 replies \ @dustwig 29 Aug 2022 \ on: Lyn Alden AMA bitcoin
There's a narrative that BTC is a hedge against inflation, it's seems true but really depends on when you bought it. If you compare BTC against the US inflation rate YOY (57.41%), BTC is the clear loser (-43.83%) as of today Aug 29, 2022, in fact if you bought anytime after June 2019 you would've lost to inflation.
We're in an overtly inflationary environment, BTC's moment to shine as a hedge against inflation has been now and it hasn't been a good hedge, it's been the opposite. It hasn’t proved itself a good store of value beyond June 2019 compared to the dollar and it’s not a good medium for exchange which begs the question, what is the near term and long term use case for Bitcoin?
Factoring in the recent fed comments, the rising dollar, and it pretty much a done deal as far as rising interest rates until inflation hits the fed target, why would anyone convert USD to BTC before the fed is done hiking rates?
Bitcoin did very well against money supply inflation. As money supply expanded in 2020/2021, bitcoin with its fixed did very well.
In 2022, those money supply increases are really affecting prices. Price increases happen on a lag. This is despite the fact that US money supply literally hasn't grown in 2022.
Bitcoin did very well exactly when you'd expect it to: when the supply of dollars has been increasing rapidly. It did poorly when dollars stopped expanding. Year-to-date in 2022, dollar supply has been less inflationary than bitcoin. Bitcoin also had leverage in it from LUNA, 3AC, and other entities.
IMO, bitcoin will do well in dollar terms when the dollar supply starts expanding again.
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Where is this 57.41% number coming from?
Over-levered and overcrowded inflation hedges do not guarantee short-term hedging against inflation.
See Japan's real estate sector. Everybody agrees that real estate is a hedge against inflation -- nobody ever puts that into question somehow.
But if you had bought Japanese real estate anywhere from 1987-2003 (16 years!) you would NOT be up today. This means that in the worst case (1987 buy), you would have underperformed inflation for 35 years.
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