Federal Reserve Bank article | Buying eggs with Bitcoin highlights price volatility, central bank and crypto community at odds

The Federal Reserve Bank of St. Louis released a special article documenting the volatility differences in purchasing eggs with the US dollar and Bitcoin since January of last year. In addition to emphasizing the volatile nature of Bitcoin's price fluctuations, the article also mentions the high transaction fees associated with cryptocurrencies. The cryptocurrency community is, of course, closely following the fiat currency pain point of "devaluation" as well.

Bitcoin vs. US Dollar

According to a blog post from the St. Louis Federal Reserve Bank, the chart below shows the price of buying a dozen eggs in US dollars, ranging from a low of $1.47 to a high of $2.52 as of April this year.

It indicates that even when priced in fiat currency, there is still significant volatility, which is why food and energy prices are often excluded from "monetary policy analysis."

The chart below illustrates the cost of buying eggs with Bitcoin during the same period. Due to the high price of Bitcoin, the chart is denominated in the smallest Bitcoin unit, "satoshi 0.00000001 (one hundred millionth of a Bitcoin)."

The cost ranges from about 2829 to 6086 satoshis, showing even greater fluctuations compared to the US dollar, and additional Bitcoin transaction fees need to be factored in, with recent prices around $2.

The post emphasizes that if one were to purchase with Bitcoin, a large one-time purchase would be needed to lower the cost, considering the transaction fees.

Community Response

Since the onset of heightened inflation due to the pandemic, coupled with the crypto community's heightened sensitivity to the long-term depreciation of the US dollar, the St. Louis Fed blog post has been met with skepticism.

Some of the criticisms from the crypto community include:

• Selecting short time periods deliberately to emphasize Bitcoin's high volatility link.
• Selecting short time periods deliberately to mask the long-term depreciation of the US dollar link.
• Bitcoin transaction fees actually being below $0.53 half of the time link.

When looking at a longer period, the cost of buying eggs with Bitcoin is shown in the chart below.

The Twitter users criticizing the Federal Reserve are mostly Bitcoin supporters, for whom this blog post only reinforces the established impression of long-term fiat devaluation. However, the high volatility of Bitcoin is a reality, similar to how El Salvador's adoption has not been widely accepted by the general population, all of which are overlooked by Bitcoin supporters.