Bitcoin (BTC) has been touted as a hedge against inflation, and now the Federal Reserve has unintentionally confirmed it. In a blog post released by the St. Louis Fed in June 2022, the comparison between buying eggs with Bitcoin versus the U.S. dollar reveals surprising results.
While Bitcoin hodlers may not have eggs at the top of their shopping list, the blog post attempts to demonstrate Bitcoin’s buying power compared to the dollar. The anonymous author of the post measures the price of a dozen eggs in BTC (measured in satoshis) and USD since January 2021. The conclusion drawn is that the Bitcoin price fluctuates significantly, ranging from 2829 to 6086 satoshis, which is much more than the fluctuation in the price of eggs in USD.
Additionally, the author highlights that using Bitcoin for purchases would necessitate adding a transaction fee, which has been around $2 but can occasionally spike above $50. The post concludes by suggesting that if you were buying eggs with Bitcoin, you would need to put many more eggs in your basket to justify the transaction fee.
Although the cost of eggs has increased for both Bitcoin and USD since the start of 2021 (39% and 73% respectively), the charts provided in the blog post show a decrease in the number of satoshis required to purchase a dozen eggs compared to the equivalent USD. As of August 2023, BTC hodlers only require 70% fewer satoshis for this purchase, while USD holders require 58% less USD.
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To gain deeper insight into Bitcoin’s performance, it is necessary to look at the longer-term perspective. In comparison to Bitcoin’s last pre-halving year in 2019, the price of eggs is significantly lower. The inflation seen in 2023 is just a blip in the landscape.
On the other hand, when looking at the price of eggs in USD, a clear pattern of solid price increases emerges. In mid-2019, the average price of a dozen eggs was barely above $1.20, which is 40% less than the current price.
As attention focuses on the U.S. dollar this month, with the U.S. dollar index (DXY) reaching near one-year highs, concerns about a potential recession loom large. Analysts suggest that foreign states may take actions to address the currency imbalance as their own currencies suffer. Meanwhile, the U.S. economy is showing warning signs, with the Fed’s data suggesting a 60% chance of recession in 2024 and bond yields skyrocketing in a phenomenon referred to as “bear steepening.”
In conclusion, the comparison between Bitcoin and the U.S. dollar in terms of buying power for eggs reveals that Bitcoin has better preserved its value over time, despite its price volatility. This unintentional affirmation by the Federal Reserve supports the narrative that Bitcoin is a hedge against inflation. However, it is important to note that this information does not constitute investment advice, and readers should conduct their own research before making any financial decisions.
