Bitcoin (BTC) has usually been promoted as an inflation hedge, but amid the worst years in over a decade of growing inflation worldwide, the bear market surged for the leading cryptocurrency that has been outperformed by other inflation hedge assets in the short term.
In this context, the Frax Price Index (FPI) — a token created in the Frax Finance ecosystem supposedly pegged to the US CPI — seems to be outperforming Bitcoin by close to 40% since its deployment, from the end of September 2022 to press time.
Although it is still an experimental project that must be looked into with caution, the FPI performance against BTC can also pose as a valuable indicator of how Bitcoin has been performing as an inflation hedge in this last year.
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“The system will adjust every month according to an on-chain Consumer Price Index oracle so that holders of the FPI will increase their dollar-denominated value each month according to the reported CPI increase.”
— FPI description by CoinMarketCap
At the time of publication, the Frax Price Index was trading at 0.00004132 BTC, with a close to one-year gain of 39.49%.
Bitcoin’s performance against gold amid increasing US CPI
Notably, another well-known inflation hedge in the history of finance is gold. There are plenty of financial products allowing investors to speculate in the price of gold (usually traded as XAU), which has also been outperforming BTC since 2022.
Amid the increasing US CPI results since January 1, 2022, the gold index (NASDAQ: XAU) has outperformed Bitcoin by 38%. Proving itself as a better hedge against the United States dollar inflation short term, during the current uncertain macroeconomics the world is going through.
Bitcoin price analysis
Meanwhile, Bitcoin has lost around 45% of its value against the USD since the beginning of last year. Moving from $47,777 per unit to $26,117 by press time.
However, BTC consolidated itself as the “best-performing asset” since the 2008 economic crisis, beating all other traditional financial products, which gave Bitcoin the validation of being a good inflation hedge long term. At least during a moment of economic expansion and wealth.
Further developments and demand dynamics over the leading cryptocurrency by market cap will settle whether Bitcoin can continue to be a good inflation hedge or not.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
