Crypto Community: St.Louis Fed Forgets Long-Term Dollar Depreciation When It Prices Eggs in Bitcoin

On Tuesday, June 7, the St. Louis Fed published an article showing how the cost of eggs priced in Bitcoin has fluctuated compared to the U.S. dollar over the past 14 months, sparking interest and curiosity in the crypto community.

On June 6, the Fed’s research arm published a blog post titled “Buying Eggs with Bitcoin — A Look at Currency-Related Price Movements.”

The article originally used a chart showing the historical price of eggs in U.S. dollars for each month since January 2021, noting that during the 14-month period, prices fluctuated between $1.47 and $2.52.

Source: The FRED® Blog

It then used a chart showing bitcoin’s performance over the same period, noting that bitcoin’s price volatility was “significantly greater than that of the U.S. dollar.”

The report did not say whether the trend was due to higher egg prices, a weaker dollar, or both.

"What would the graph look like if we bought the same carton of eggs with bitcoin instead of dollars?"

Source: The FRED® Blog

It also drew attention to bitcoin transaction fees, which it said could range from $2 to $50.

“Also, you have to pay Bitcoin transaction fees, which have been around $2 lately, but occasionally spike above $50. If you’re buying with Bitcoin, hopefully you’re putting more eggs in the basket,” it said wrote.

Encrypted Twitter Reactions

The blog post eventually drew the ire of the crypto community on Twitter, with many arguing that the St. Louis Fed was “picking” the time period to push the narrative of Bitcoin’s instability, rather than “in the long run,” which is a sign that the Fed is “picking and picking” time periods to promote Bitcoin’s instability. Instead, it will show a massive depreciation of the dollar.

A Twitter user named @MapleHodl pointed out that the U.S. dollar continues to depreciate over time, while Bitcoin, although appreciating, is volatile in the short term, so "accumulate egg yolks accordingly."

Other Twitter users said that the St. Louis Fed even recognized Bitcoin as a unit of account, which is a positive sign for the cryptocurrency king.

“Whatever they say. They use Bitcoin as a unit of denomination for comparison. It’s really significant.”

The recent St. Louis Fed article comes as a Bloomberg MLIV Pulse survey on June 6 shows that cryptocurrency and tech stocks are “very vulnerable” to the U.S. central bank’s quantitative tightening program aimed at curbing inflation.

Source: bloomberg.com

“This historic shift is seen as a notable threat to tech stocks and digital tokens — two risk-sensitive assets that soared in the COVID-era market mania and plummeted in this year’s cross-asset crash.”

The U.S. dollar has lost 26 percent of its value since Bitcoin’s creation in 2009, and has averaged 2.32 percent annual inflation since then, according to inflation tracker data.

Bitcoin, on the other hand, started at $0 in 2009 and was worth $29,495 at the time of writing.

The chart below shows the purchasing power of a dollar at today's prices. In 1913, one dollar could buy 30 Hershey bars. In 2020, it can only buy a cup of McDonald's coffee. Additionally, the U.S. money supply (M2) has increased substantially over the past 20 years, from $4.6 trillion in 2000 to $19.5 trillion in 2021.

Dollar Purchasing Power Over Time - visualcapitalist.com