Bitcoin vs. The Dollar: The Unexpected Winner in the "Eggflation" Battle

In the unending quest to understand inflation, the Federal Reserve has turned to an unlikely medium: eggs.

by Faruk Imamovic
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Bitcoin vs. The Dollar: The Unexpected Winner in the "Eggflation" Battle
© Getty Images News/Matt Cardy

In the unending quest to understand inflation, the Federal Reserve has turned to an unlikely medium: eggs. And, even more surprisingly, the currency of comparison isn't the U.S. dollar alone but the digital cryptocurrency Bitcoin.

Their recent findings, however, have led to some unexpected results.

Comparing Cryptocurrency and Real Currency

In a June 2022 blog post, which has been subsequently updated, the St. Louis Fed made a rather peculiar comparison — evaluating the buying power of Bitcoin and the U.S.

dollar when purchasing eggs. While many Bitcoin holders might scoff at the idea of using their digital assets to buy such a mundane item, the intent behind this analysis was to highlight Bitcoin's purchasing strength against the U.S.

dollar. The study's anonymous author detailed that the price of a dozen eggs in Bitcoin, quantified in satoshis, and its U.S. dollar equivalent from January 2021. As stated in the post, “The price fluctuates quite a bit, between 2829 and 6086, which is much more than it did for the U.S.

dollar price”. However, it's not just about the sheer value. Purchasing eggs with Bitcoin involves transaction fees, which, while averaging around $2, can occasionally spike to over $50. The research quips, "Hopefully, if you were making this purchase with Bitcoin, you’d put many more eggs in your basket”.

Reading Between the Lines

Interestingly, charts accompanying the research show that since December 2022, the number of satoshis (or sats, the smallest unit of Bitcoin) needed to buy the same dozen eggs has significantly decreased when compared to the equivalent U.S.

dollar. By August 2023, Bitcoin holders needed 70% fewer sats to make the purchase, compared to a 58% reduction in U.S. dollars. What does this say about inflation? Bitcoin, once viewed skeptically in traditional financial circles, has shown an unexpected resilience against inflationary pressures, particularly when compared to the U.S.

dollar. In fact, a term has been coined for this phenomenon: "Eggflation." However, in 2023, Eggflation was merely a minor fluctuation. Looking at the broader picture, the cost of eggs in U.S. dollars has seen a noticeable rise — with prices in mid-2019 barely surpassing $1.20 per dozen, a stark contrast to the 40% increase seen currently.

A Glimpse into the Future

Yet, as we move closer to 2024, recession alarms are starting to ring, with even the Fed's data suggesting nearly 60% odds in September. Additionally, soaring bond yields hint at a financial scenario known as “bear steepening”.

While this egg-centric research may seem quirky on the surface, its implications and the results it reveals about Bitcoin's inflation resistance are profound. Only time will tell if Bitcoin continues to prove its worth against traditional currencies.

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