The Bitcoin rally stalled on heightening worries about inflation, but it remains “a better shield than gold,” according to the chief executive of a leading financial advisory and fintech.
The largest cryptocurrency by market capitalisation ended three consecutive days of healthy gains, before stabilising, after U.S. Federal Reserve Chair Jerome Powell said on Tuesday it may be time to stop using the term “transitory” as a way of describing the current wave of inflation.
After peaking at $67,510 on November 7, BTC stabilised at $57,080 on December 1.
Meanwhile, inflation in Europe has ballooned to the highest on record.
“Bitcoin is perceived by many investors as a hedge against inflation due largely to its strict supply controls,” said deVere CEO Nigel Green.
“It is assumed that its price would automatically rise when the U.S. central bank suggests that it would consider speeding up the reduction of its asset purchase policies that have boosted the stock markets.
“But for other investors, including major institutional investors who have piled into Bitcoin in recent months, the cryptocurrency is still perceived as a risky asset.
“When they sell-off riskier assets, despite the longer-term outlook and based on short-term hawkish policies from the world’s de facto central bank, Bitcoin, like equities, also becomes vulnerable.”
A long-term, high-profile crypto advocate, Green remains confident that Bitcoin is today a greater inflation shield than gold, which has long been the standard go-to inflation hedge.
“Gold has always been regarded as the ultimate inflation hedge – but the world is a much different place now. Our lives and the global economy is increasingly run on tech and digital solutions and this megatrend is only set to become more dominant,” said Green.
“Gold is likely to be dethroned within a generation as millennials and younger investors, who are so-called ‘digital natives’, are going to be more comfortable with Bitcoin as a hedge than a physical metal.”
The deVere CEO added that Bitcoin is often referred to as ‘digital gold’ because like the precious metal it is a medium of exchange, a unit of account, non-sovereign, decentralised, scarce, and a store of value.
“Yet, the cryptocurrency, Bitcoin is superior to gold as a medium of exchange or form of payment.
“Unlike gold, it is a fixed unit of account and easily divisible and transportable. Gold is not easily immediately divisible, and there are potential issues with purity and verification. Whereas Bitcoin is easily traced on blockchain technology and this is going to be a considerable advantage, especially in cross-border transactions.”
Green concluded that gold and Bitcoin can, and perhaps should, complement each other in a portfolio.
“As the world continues to pick up momentum in its shift towards tech, and as millennials become a more dominant part of the world economy, we should expect Bitcoin to also take an increasingly influential role in financial markets, including in regards to being an inflation hedge.”