Bitcoin investors are being forced to rethink why they hold the asset amid cooling inflation data, according to Bitcoin trader Anthony Pompliano.
“I think the challenge for Bitcoin investors is, can you hold the asset when you don’t see high inflation on a day-to-day basis?” Pompliano he said during a Thursday interview with Fox Business. “Can you still believe in the value proposition of Bitcoin, which is that it is a finite supply asset. If they print money, Bitcoin will go up,” he said.
“Bitcoin and gold are great long-term things,” he said. Consumer Price Index (CPI) cut To 2.4% in January from 2.7% in December, according to the Bureau of Labor Statistics. But recently Mark Zandi, chief economist at Moody’s he said CNBC said inflation “looks better on paper than in reality.”
Bitcoin (BTC) is typically viewed as a hedge against inflation because only 21 million coins will ever exist. As central banks boost the money supply and the value of fiat currencies falls, investors often turn to perceived riskier assets such as Bitcoin to protect their purchasing power.
Bitcoin sentiment has reached multi-year lows
This comes as Bitcoin sentiment hits a multi-year low, not seen since June 2022, with Crypto Fear & Greed Indexwhich measures overall cryptocurrency market sentiment, posts an “Extreme Fear” score of 9 in its Saturday update.
At the time of publication, Bitcoin was trading at $68,850, down 28.62% over the past 30 days, According to to CoinMarketCap.
Devaluation of the US dollar will be disguised as a ‘monetary slingshot’
Pompliano said the macro environment could create short-term volatility for Bitcoin before it returns to an upward path.
“In the short term, there will be deflationary forces, people will ask to print money and lower interest rates,” he said.
He explained that this would lead to the devaluation of the dollar, although the effect would not be immediately apparent.
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“The currency will devalue over time as the deflation masks its effects, which is why I call it the monetary slingshot,” Pompiano said.
Pompliano forecast that the Federal Reserve will continue to boost the money supply to “deal with inflation,” but with the dollar further devalued, he expects Bitcoin to become “more valuable than ever.”
The US Dollar Index, which tracks the dollar’s strength against a basket of major currencies, is down 2.32% over the past 30 days at $96.88. According to to TradingView.
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