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Why is the Fed tracking the price of eggs in Bitcoin?

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Economist Turr Demister tweeted that it is “wild” that the St. Louis Fed is collecting data on the ratio of eggs to bitcoin.

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Given the unusual nature of the pair and the fact that most do not use bitcoin to pay for products, the question arises why?

Egg to bitcoin ratio

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Louis Fed already tracks the average monthly price of a dozen large Grade A chicken eggs against the US dollar.

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The chart below shows an uptrend in the dollar price of eggs since 2000. The price peaked in September 2015 at $2.97 leading to a sharp drop over the next few months before resuming the uptrend after bottoming at $1.20 in June 2019.

Egg price in dollars since 2000

A note to the chart explains why food (and energy) prices are excluded from “monetary policy analysis” such as the consumer price index used to calculate inflation.

“This low volatility is why food prices, along with energy prices, are often excluded from monetary policy analysis.”

Doing the same thing but using bitcoin instead of dollars was a concept hatched by statisticians from the St. Louis Fed.

“Uncovering this first concept is pretty simple, but the FRED Blog team had the idea to ask a different question: what would the graph look like if we bought the same box of eggs with bitcoin instead of US dollars?”

A comparison chart for 2000 is not available because Bitcoin did not exist until 2009. In any case, the data held by the organization only refers to January 2015.

The price of bitcoin eggs is calculated by dividing the average price of a dozen large Grade A eggs by the price of Coinbase bitcoins multiplied by 1,000,000,000 to express the value in satoshi.

Data analysis shows a clear downtrend. The price of BTC has not been visible in the chart below since Q4 2019, indicating that it takes less than a Satoshi to buy a dozen eggs in the long run. An alternative view is that the value of BTC is rising compared to the price of a dozen eggs.

Egg price in bitcoin

The Fed did not expect this

Per Teacherwhile the egg-to-bitcoin ratio began as a “diss” to insult bitcoin’s volatility, its existence is a tribute to its credibility.

“It doesn’t matter that the Eggs/BTC chart was created to show the volatility of bitcoin. What it does is add another rung to the belt of trust for hard digital money. Bitcoin is not going anywhere and no one in the world can afford to ignore it.”

However, what the St. Louis Fed didn’t count on was comparing the two variables over the longer term.

The upward trajectory of the dollar chart contrasts with the Bitcoin chart. In this way, we provide strong evidence that the purchasing power of BITcoin increases over time compared to a product of daily use in the real world.

What can not be said about the dollar.

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