Rising inflation can lead to Bitcoin gains in the US, according to economic reports.
US Federal Reserve Chair Jerome Powell will give a speech at the Jackson Hole Economic Policy Symposium on Thursday, 27 August, and he could bolster expectations of inflation.
Powell will likely signal tolerance for higher inflation during his speech. The central bank has mostly missed its 2% inflation target since 2012.
Past statements from Fed officials and economists suggest an “average inflation” target of above 2% annually would be both tolerated and desired. However, this comes with various economic outcomes. And for Bitcoin, it’s a positive one.
Inflation in the US can ultimately lead to further drops in the dollar and greater buying power for Bitcoin traders and investors, according to analysts.
A more relaxed approach to managing price pressures could power a stronger rise in long-term inflation in the US.
A change in monetary policy and further depreciation of the US dollar could propel Bitcoin higher. This is the major impact that could come out of this symposium, Matthew Dibb, co-founder of Stack, said.
Many expect inflation will be a driving factor for Bitcoin gains. This is due to the perception of it being a hedge asset similar to gold.
Bitcoin has largely tracked the metric higher over the past five months, while the dollar index has declined by nearly 10%.
Recent data shows Bitcoin’s rise has been to some extent fueled by the diminishing value of the dollar. Bitcoin looks well positioned to benefit from a resurgence in inflation and further dollar devaluation over the long term.