In March 2023, an annual report prepared by the Council of Economic Advisers was submitted to the United States Congress. The Economic Report of the President provides an overview of the nation’s economic progress during the previous year and the President’s economic agenda for the upcoming year. What is interesting about the latest report is a whole section was dedicated to the crypto space.
The report is supposed to be a guide and it has several conclusions regarding crypto. One of the conclusions made by the experts is that crypto is an ineffective inflation hedge. This assumption is based on crypto prices collapsing in 2022.
But as inflation increased globally in the second half of 2021 and in 2022, the prices of crypto assets collapsed, proving them to be, at best, an ineffective inflation hedge(Council of Economic Advisers, 2023)
It is easy to say that the Council of Economic Advisers is wrong, but let us try to look at it closely and check if their thesis holds water.
How does Crypto compare with Gold?
Bitcoin is the first and largest crypto asset. It is common knowledge that those who acquired it early are now in profit. Let us take a look at the percentage gain of this digital asset since 2010 and compare it to a traditional asset like gold.
Gold has been the benchmark of wealth since ancient times. Kings, countries, and empires have all sought to accumulate as much as they could of the precious metal. Up until 1971, the U.S. Dollar has been backed by gold. Central banks around the world still keep it as part of their reserves.
The chart above is for gold. As we can see, it has increased its value by almost 100% since 2010. Gold has reached over two thousand dollars at its peak.
The chart above shows the BTC price action since inception. The price difference from 2010 up to the present is too great that it is hard to use the measuring tool. The highest price for BTC in 2010 was fifty cents. BTC reached an all-time high of over $69,000, which represents an approximate 13,800,000% increase. The price of Bitcoin is over $20,000. This still represents a 3,999,999% increase from 2010. Bitcoin, the king of crypto, clearly wins here.
Comparing Crypto Prices with Stocks
The Standard & Poor’s 500 or SPX is an index of the performance of the 500 largest companies listed in stock exchanges, in the United States. It is considered an indicator of the overall health of the U.S. stock market. Let us take a look at its performance since 2010.
The SPX increased approximately 378% since 2010.
Apple (AAPL) stocks are considered blue-chip. This top technology company is one of the largest and most well-known companies offering reliable returns. Below is a chart of AAPL
AAPL has an amazing return of 3,274% from 2010, but still fails in comparison to a crypto blue chip like Bitcoin.
Much Much Do You Need to Buy Eggs?
The recent price increase in the price of eggs is a cause for concern. A lot of kitchens list eggs as a primary ingredient for a lot of recipes. Have you ever wondered how much was a dozen eggs several years ago? Below is a chart showing the price of eggs from 2010 to the present.
According to the U.S. Bureau of Labor Statistics, you needed around $1.9 to purchase a dozen eggs in 2010. In January 2023, a dozen eggs will cost more than $4. It clearly shows that the average person’s spending power has decreased.
In 2010, Bitcoin was just a crypto asset that only a few people know of. Its price was just 50 cents. You would need around 4 BTC to get a dozen eggs. Bitcoin’s current price is above $20,000 and with that amount a person can buy around 5,000 dozen eggs.
Did Crypto Fail as a Hedge?
It is true that crypto has suffered a lot in 2022. Prices were affected by a lot of factors. The Terra (LUNA) collapse started a contagion that drove the market down. The failure of FTX has proven that not all crypto companies will stand up to scrutiny. But if we look at the charts, even the traditional market has big red candles. Clearly, nobody is spared during the bear market. As long as an asset is traded, its prices will always rise and fall.
The report can say all it wants against the crypto space, but the charts are telling us a different story. It tells us that Bitcoin, the gold standard of crypto, has risen in value since its inception. It tells us that more and more people are starting to realize that they can store value using crypto. Where else can you invest 50 cents and have enough money to buy 5,000 dozen eggs after 13 years?
Read about the 2023 Economic Report of the President here.
This article is not financial advise. It was written for educational and entertainment purposes. Consult a professional before taking on any risk.
Featured Image from Unplash
Charts from Tradingview
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