Grayscale says more people will want to buy Bitcoin because the deficit and inflation are not sustainable.

Grayscale says that the recent increase in prices may be bad for crypto in the short term, but if prices keep going up, people will like cryptocurrency more in the long run.

Inflation means prices going up for things people buy, which makes money worth less.

In March, the cost of living went up more than expected. Prices went up by 0. 4% compared to last month and by 3. 5% compared to last year.

This was different from what Dow Jones economists thought would happen. They predicted the economy would grow by 0. 3% in one month and 3. 4% in one year.

The change happened because the cost of housing and fuel went up. This information comes from a report by the US Bureau of Labor Statistics.

Raising interest rates is a way to lower prices by making it harder to borrow money, which slows down how much people and businesses spend. It also makes the country’s money stronger and changes what people think will happen with prices in the future. All these effects together lower the amount of inflation in the economy.

So, the sudden rise in prices has made people doubt if the Federal Reserve will lower interest rates in the next few months.

According to CME’s FedWatch tool, traders think there is a lower chance of a decrease in interest rates in June (20. 6%) compared to September (45. 9%)

This means that people who study the market think the US Federal Reserve will not change interest rates in May and June. They think the first time rates might go down is in September.

This makes the economy stay slow for a longer time, which means less money going into things like Bitcoin and investors selling their assets. Bitcoin’s price dropped by 2. 5% on April 10th because of the unexpected CPI numbers. Though, fixing it later that day.

A chart showing Bitcoin's price action on April10th

In the past, the 10-year real interest rate spiked, and Bitcoin’s price fell dramatically in correlation.

A Chart showing the the 10-year real interest rate from 1980 to March 2024

From December 2017 to January 2018, the 10-year real interest rate surged from 0.573 to 0.873, as reported by the Federal Reserve Bank of St. Louis. During which, Bitcoin experienced a 28% decline.

Chart showing Bitcoin's price movement from late 2017 to early 2018.

Grayscale – Rising prices are good for cryptocurrency.

Zach Pandl, who is in charge of research at Grayscale, says that the current negative feelings in the market are okay. He believes that the increasing prices are bad for cryptocurrency in the short term. Also, he thinks that the Federal Reserve probably won’t lower interest rates for some time.

Instead, he said that events like the Bitcoin halving, increasing economic growth, and more people using cryptocurrency will make the price of Bitcoin go up.

“Bitcoin halving and adoption trends like tokenization should create a supportive environment for crypto markets.”

Pandle thinks that cryptocurrency will do well in the future because more people are interested in it, especially if interest rates go up.

As prices go up and regular money loses value, things like Bitcoin will remain popular. This is because the US government is spending too much and keeping interest rates high. Pendl thinks this will continue to make Bitcoin valuable.

However, there are some uncertainties about this. Despite being a successful investment over the long term, Bitcoin’s value goes up and down a lot, which makes it risky to invest in.

So, investors may prefer to put their money in less risky things like regular bonds and term deposits.

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