Pompliano: Declining Inflation Presents Critical Test for Bitcoin Investors
Anthony Pompliano, a prominent Bitcoin entrepreneur, believes the cryptocurrency will reach unprecedented value levels once deflationary forces cease to mask their "impact" on the United States dollar.
As inflation metrics show signs of cooling, Bitcoin entrepreneur Anthony Pompliano suggests that cryptocurrency investors face a crucial moment requiring them to reassess their rationale for maintaining positions in the digital asset.
"I think the challenge for Bitcoin investors, can you hold an asset when there is not high inflation in your face on a day-to-day basis?" Pompliano said during an interview with Fox Business on Thursday. "Can you still believe in what Bitcoin's value proposition is, which is that it's a finite-supply asset. If they print money, Bitcoin is going higher," he said.
"Bitcoin and gold are great long-term things," he said. The Consumer Price Index (CPI) fell to 2.4% in January from 2.7% in December, according to the Bureau of Labor Statistics. However, Mark Zandi, Moody's chief economist, recently told CNBC that inflation "looks better on paper than in reality."
Due to its fixed maximum supply of 21 million coins, Bitcoin (BTC) is commonly regarded as an inflation hedge. As central banking institutions expand monetary supply and fiat currency values decrease, market participants frequently migrate toward assets perceived as higher risk, including Bitcoin, as a means of safeguarding their buying power.
Multi-year lows recorded in Bitcoin market sentiment
This development coincides with Bitcoin sentiment plummeting to levels last observed in June 2022, as the Crypto Fear & Greed Index, a measurement tool for overall cryptocurrency market sentiment, registered an "Extreme Fear" reading of 9 in its most recent Saturday assessment.
At the time of publication, Bitcoin is changing hands at $68,850, representing a 28.62% decline over the previous 30 days, according to CoinMarketCap.
"Monetary slingshot" phenomenon will obscure US dollar devaluation
According to Pompliano, the current macroeconomic landscape may generate near-term price fluctuations for Bitcoin prior to the asset continuing its long-term upward movement.
"We're going get deflationary-type forces in the short term, people are going to ask to print money and to drop interest rates," he said.
His analysis indicates that these dynamics will result in the deterioration of US dollar value, although the consequences may not manifest immediately in observable ways.
"The currency is going to be devalued at a time where deflation covers up the impact, so I call it a monetary slingshot," Pompiano said.
Looking ahead, Pompliano projected that the Federal Reserve will persist in increasing the money supply in its efforts to "deal with inflation," but as the dollar undergoes additional devaluation, he anticipates Bitcoin will emerge as "more valuable than ever."
The US dollar index, a metric measuring the dollar's performance relative to a basket of major currencies, has decreased 2.32% over the past 30 days and currently trades at $96.88, according to TradingView.