Bitcoin: The Bull Run Is Starting Once Inflation Expectations Turn Around

SummaryIn 2020, prominent investors and hedge fund managers supported the thesis that Bitcoin would be a good hedge against the “Great Monetary Inflation”.Since the beginning of the year, central banks have been hiking interest rates at a historic unprecedented pace to fight inflation.In this environment, Bitcoin has been performing badly, falling 70% from its highs.In this article, we look at the relationship between inflation and Bitcoin. Counterintuitively, we can observe that Bitcoin has been a good hedge against inflation expectations even during 2022.Exploring the relationship between Bitcoin and inflationPrices for just about everything - gas, groceries, housing, cars, clothes, even TVs - have spiked in the past two years. Inflation, which had been scarcely noticeable for decades, is suddenly the top concern most people have about the economy.Not long ago, prominent investors and hedge fund managers such as Paul Tudor Jones, Ray Dalio and Stanley Druckenmiller supported the thesis that Bitcoin (BTC-USD) would be a good hedge against the "Great Monetary Inflation", a May 2020 study. At the time the study was published, Bitcoin was below $10.000 and a remarkable bull market had started that led to the price of Bitcoin reaching almost $70.000 in 2021.We can observe the effects of what Paul Jones was referring to in the two charts below provided by the Federal Reserve Bank of St. Louis:*Fed balance sheet expansion during th...