Bitcoin is in recovery mode on Wednesday amid mounting inflation concerns and hopes for mass adoption after El Salvador’s parliament approved cryptocurrency as legal tender.
The cryptocurrency changed hands near $ 34,000 at press time after being withdrawn from a bid near $ 31,000 late Tuesday. According to information, this was the lowest level since April 23. CoinDesk 20 Data.
Data released by China earlier this morning showed that producer price index (PPI), also known as factory gate inflation, rose 9% in the past month, the largest year-on-year increase since September 2008.
China’s PPI tends to increase inflationary pressures around the world as the country is a major buyer and supplier around the world. “Rising costs everywhere, especially in China, will increase global inflationary pressures,” said Dariusz Kowalczyk, an economist at Crédit Agricole. said the Financial Times. “I think we will live with higher inflation worldwide, and what happens in China will help.”
That’s bullish for Bitcoin, widely seen as an inflation hedge, as the pace of supply expansion is halved every four years.
Big profits, however, could be difficult to achieve for some time as policymakers around the world could raise interest rates or scale back asset-buying programs to curb inflation, a process known as tapering. A fine tends to dilute the appeal of the store of value like bitcoin and gold.
China is already sucking liquidity from the system, as from Caixin Global. Meanwhile, the Fed’s loose monetary policy has come under fire in recent weeks, with many experts arguing that it is inappropriate given concerns over rising inflation.
“The concern about the current policy course of the Fed started with a few and is now developing into an avalanche of former central bank officials, economists and market participants – and rightly so,” said Mohamed El-Erian, chief economic advisor at the German finance ministry at Fixed Alliance. tweeted.
Taper talks could escalate if the US consumer price index, due to be released on Thursday, beats expectations. Those concerns are here to stay, like Messaris Mira Christanto noticed recently, and could deter the market from welcoming other positive developments like the Bitcoin rollout in El Salvador.
The Parliament of El Salvador approved Bitcoin legal tender early Wednesday obliging all businesses to accept Bitcoin for goods and services. The move has raised hopes for widespread government takeover.
However, other nations may choose to see how things develop in the Latin American country before following its example.