- Bitcoin and Copper are quite similar as they have the same characteristics during inflation
- Jeff Currie believes that cryptocurrencies should be used as a safe bet against demand pull inflation
- Demand has increased over and above supply in the US and weaker dollar combined have drawn investors to cryptocurrency
Investors are in a hurry to categorize Bitcoin as digital gold as it is an effective hedge. However, Jeff Currie, Global Head of Commodities Research in the Global Investment Research Division, Goldman Sachs differs to do the same and claims that it is too volatile as an asset class. He is of the fact that an inflation hedge may be considered good or bad according to investment characteristics an asset class consists of. He reiterated that Bitcoin is more similar to copper than gold. Cryptocurrencies are pro-risk and risk-on assets and are a perfect hedge against risk-on inflation hedge.
Rising inflation continues its streak
The pandemic has driven regulators on the edge with prices of commodities increasing at a brisk pace, especially in the US. The personal consumption index grew 3.1% in April and the demand has substantially outstripped supply on various fronts. It is here that Gold and cryptocurrency play their part and act as a hedge against rising prices.
However, Currie feels that crypto’s are similar to Copper and not Gold. The latter rose $200 since April while cryptocurrencies shrunk 25% in the last three months and grew by the same percentage since April.
He drew a fine line between the two metals and requested investors to not look at digital currencies to protect themselves against inflation. Lastly, the Fed is poised to grapple with rising prices over the next 12 months if experts are to be believed.
Cryptocurrencies are a safe bet against demand-pull inflation
Some believe digital currencies are a hedge against ‘crazy’ but they definitely protect investors against rising prices due to increase in demand. It is the best mode of investment when real yields are zero as most of the supply is limited. Bitcoin has a supply cap and hence seen as a better hedge against inflation.
The weakening of USD off late has also played its part in more investors looking at cryptocurrency to safeguard their investments. The latest asset class has a decentralised financial system, infrastructure distributed in the form of computer nodes throughout the world and regulated by miners, validators and developers only. It is a unique form of investment that acts as a proxy for retail inflation.
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Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.