As inflation concerns rise, investors are fleeing for gold to cryptocurrencies. As inflation rises, investors are dumping gold in exchange for cryptocurrencies, fleeing the precious metal touted as an inflation hedge, according to analysts. More than $10 billion has been withdrawn from the largest gold trading fund in the last 12 months, and their gold stocks are down, in line with Bloomberg data.
Is Bitcoin replacing gold in inflation protection?
cryptocoin.com As we reported, the price of gold has dropped 6.1% in the last 12 months to $1,782, while Bitcoin (BTC) has more than doubled its value this week, surpassing $67,000, reaching an all-time high. Some investors have come to view Bitcoin and different cryptocurrencies as an inflation hedge during the last critical period of inflation in the world. Senior gold traders acknowledge that things have changed. John Hathaway, senior portfolio manager at Sprott Asset Administration, a precious metals funding group, comments:
At the moment we have no doubts about the appropriate technique. The Bitcoin community sees the same issues I see when it comes to the dangers of cash pressure from inflation.
Gold has long been considered superior, as a hedge against the declining purchasing energy of fiat currencies such as the dollar. Subdued demand, supply chain woes, and incentives from central financial institutions are fueling inflationary concerns that at times support gold markets. The information obtained is still not included in the money markets. The dollar strengthened with the US economic system and the value of gold fell as investors looked elsewhere. Mohamed El-Erian, head of Cambridge Queens’ Faculty and Allianz’s chief financial advisor, said:
There is now a tendency to look at Bitcoin as a portfolio diversifier, and inflation is effectively one of many catalysts. Bitcoin attracts cash from gold.
“Institutional investors prefer Bitcoin over gold”
Hedge fund supervisor Paul Tudor Jones said in a statement Wednesday that he prefers cryptocurrencies to gold as a hedge against inflation. According to Constancy’s latest Institutional Investor Digital Goods Review, which surveyed 1,100 top investors, Bitcoin’s lack of implicit correlation with different asset units and its perceived potential as a hedge against inflation raises its reputation.
More than half of hedge funds surveyed in Europe and the US cite rising inflation as the main driver of their appeal to digital assets. Almost eight in ten surveyed investors say cryptocurrencies have a place in a portfolio. On the subject, JPMorgan analysts make the following assessment:
Institutional investors seem to be returning to Bitcoin. Maybe they see it as greater inflation protection than gold.
Gold poised to rise significantly, according to John Hathaway
Bitcoin (BTC) was launched in 2009, whereas gold has been traded for thousands of years. Followers of the cryptocurrency say that its use as a hedge against inflation is due to its design, which limits the highest diversity of digital cash at 21 million. This differs from the money-printing measures that central banks have taken in response to the pandemic.
Some gold investors say the fate of the commodity may be about to change if inflation persists, undermining the Federal Reserve’s belief that rising costs are temporary and require an extra serious tightening of financial coverage. Additionally, they point to Bitcoin’s short-term efficiency, historical background, and value volatility that undermines its credibility as an inflation hedge. John Hathaway of Sprott Asset Administration shares this thought:
I believe that gold is ready to rise significantly if developments take place in line with my reservations.
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