Bitcoin saw another daily red close after a tremendous rally last week. This has now erased most of the gains made during this period and left the digital asset to struggle once again below $23,000. Momentum quickly waned as news of the recession took hold. Its viability as an inflation hedge is once again in question given its performance so far this year.
Is Bitcoin still a good bet?
Bitcoin being an inflation hedge, has been one of the digital asset’s selling points. This is due to its year-over-year performance compared to other financial markets over similar periods. Since these financial markets, such as the stock market, were unable to keep up with the high rate of inflation, investors naturally flocked to bitcoin as yearly returns outweighed percentages. ‘inflation.
That is, until a bear market where bitcoin’s performance as an inflation hedge begins to shake. An example is the bear market the market is currently experiencing. This decline has seen the digital asset lose around 44% of its value during this time and inflation continues to hit 40-year highs. But on a month-to-month basis, bitcoin has outperformed leading markets such as the S&P, confirming its ability to generate reasonable returns even during a bear market.
BTC sees another red daily close | Source: BTCUSD on TradingView.com
Bitcoin is up more than 20% in the past month, while the S&P is up just 8%. But on an annual basis, the market is falling significantly less than bitcoin at 5.8%. So, while bitcoin has proven to be a good bet to hedge against inflation, it remains a choice for investors with a high appetite for risk.
Market Sentiment Indicates Recovery
The crypto market crash in June had sent market sentiment deep into extreme fear territory. This would persist for a few weeks as cryptocurrency prices struggled to recover their lost value. However, that would quickly change when bitcoin saw a rapid price recovery in July.
Bitcoin had moved back above $24,000 which once again sparked confidence in the hearts of investors. Sentiment had recovered with the price and towards the end of the month had reached a high score just below 30 on the Fear & Greed index. That score still put him in fear territory, but was a remarkable upturn in sentiment nonetheless.
Now, even with the decline, the data shows that investors still maintain positive sentiment towards digital assets such as bitcoin. One thing that positive feelings stimulate is buildup, and buildup leads to recovery. Bitcoin just needs to hold above the $22,700 support and close with a higher price for a bounce above $23,000.
Featured image from Outlook India, chart from TradingView.com
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