Why Investors Are Choosing Bitcoin Over Gold To Hedge Against Inflation

Deutsche Bank strategist Jim Reid reckons that investors are increasingly shifting to the use of bitcoin over gold to hedge dollar risk and inflation.

Bitcoin (BITCOMP), being a store of value and a means of payment, is rapidly gaining traction, especially among young investors. Crypto enthusiasts have for the longest time considered bitcoin as a digital version of gold since it is limited and has a predictable supply and utility case as a store of value outside the banking influence as reported.

Previously, gold (GLD) used to be used in hedging dollar risk, inflation among other risks. Bitcoin’s adoption rate, however, has been noticeably surging this year with great participation from the millennials.

Reid noted in a report that was discussing the performance of investments amid vaccine news that:

 “one of the oddities has been the dramatic divergence between gold (-3.6%) and silver (-4.4%) on the one hand, and bitcoin (+13.4%) on the other.”

As per a recent Cagrvalue report, JPMorgan analysts had earlier on shared the same sentiments stating that the price of bitcoin will likely triple driven by increased participation of millennials in the crypto sphere.

Other assertions are from different hedge fund managers who also believe that bitcoin could outperform gold as a store of value.

Billionaire investors such as Stan Druckenmiller and Bill Miller also reckon that every major bank must in the long run be exposed to bitcoin’s adoption.

The report however acknowledged that bitcoin’s size is relatively smaller than gold—physical gold has a valuation of $2.6 trillion whereas bitcoin’s market cap is valued at $242.7 billion.

Cryptocurrency’s value mainly comes as a result of its utility as a store of value. With more economic agents acknowledging cryptocurrencies as a means of payment, their utility and value will be much higher in the long run.

Governing bodies in conjunction with central banks globally introduced monetary and fiscal policies meant to protect against economic fallout resulting from the novel coronavirus. The introduction of these policies luckily bore positive impacts on the crypto sphere with bitcoin surging 144% while gold 22%.

“Bitcoin is up another +3% overnight and seems to be creating a momentum of its own. It’s up over 70% over the last six weeks as more and more investors are starting to see it emerge as a credible asset to invest in. In the long term, the central bank’s digital currencies will replace cash” said Reid