Just explain this to me please anyone. How even in a normal scenario will inflation in fiat markets effect bitcoin negatively.
When inflation rate is high, federal reserve may increase the interest rate to control money supply and decrease the inflation rate.
Given the current high inflation rate, it's expected that federal reserves increase the interest rate by 75 basis points in their next meeting. This is affecting all the markets including bitcoin.
Your explanation still doesn't make it any clearer because ordinarily one would expect that people will find a safe haven in Bitcoin or any other financial instrument like gold to hedge against inflation. I've monitored the relationship between Bitcoin/Pounds and Bitcoin/Euro, I discovered that Bitcoin follows the pounds pattern more. That's it goes up or dips whenever pound does the same. Today's movement differs. Perhaps, Bitcoin price will respond and move up like pounds is doing before the end of today.
It has to do with the expansion and contraction of the money supply. Interest rates going down increases the money supply, up has the reverse effect. At least in theory. The stock market almost always goes up when the interest rates go down, and vice versa. See: Alan Greenspan's market manipulation. This wouldn't seem like it should effect bitcoin price, but remember the markets aren't what they used to be. Before institutional investors got involved, retail investors more or less controlled the market. Now we are just a drop in the bucket. So when institutions pull out investments as interest rates rise, this includes bitcoins. This may be because they are investing on margin, or because they see better returns elsewhere where they can get a better %. It gets complicated, and I don't really understand it all, but that is how I understand it.