Genesis Trading, head of market insights, Noelle Acheson, explored whether Bitcoin makes a compelling argument for being seen as a possible inflation hedge, similar to how gold has been viewed for decades.
Speaking with CNBC’s Brian Sulivan, she discussed the confusion in the market around Bitcoin being a hedge against inflation in comparison to gold which has recently reached a five-month high in response to inflation.
The head of market insights stated:
“The market is struggling to come to terms with what Bitcoin is, and many assume it’s an inflation hedge because that’s what they’ve been told.”
Bitcoin following Gold
In addition, Acheson went on to say that Bitcoin has not been tested as an inflationary asset because it has not been around long enough; gold, on the other hand, has been around long enough to be tested; however, the correlation between gold and inflation is actually quite low.
With regards to this matter, she declared:
“If Bitcoin is digital gold and gold is an inflation hedge, then it follows, but there’s no evidence of that. Bitcoin hasn’t been around long enough to test gold certainly has been around long enough, but the actual correlation between gold and inflation is actually quite low, but maybe that doesn’t matter because the correlation between Bitcoin and gold is also very low,” she said.
Furthermore, the connection between Bitcoin and gold is also quite low; she pointed out that it has been negative since early summer and has stayed negative until the beginning of this month, which explains the market’s confusion.
Bitcoin an inflation hedge
In reply to a question about why Bitcoin surged while no one was talking about inflation for years and why Bitcoin sank when inflation began to take off in the spring, Acheson responded:
“Claiming it’s an inflation hedge, there is no evidence for that whatsoever claiming that it is likely to be strong of capital against eventual currency debasement longer-term yes that does look very likely simply because like gold has acted in that role for millennia.”
In comparison to gold, she added:
“Bitcoin has a more provable quantity in circulation; it has a more provable scarcity; it also is easier to access, easier to hold, easier to transport, and has the additional layer on top that we don’t yet know what its eventual use case will be.”
Bitcoin outperforming gold
With major central banks printing $25 trillion since the 2008 global financial crisis, and some of the highest levels of inflation in more than 30 years being recorded, investors are turning to gold, stocks, and cryptocurrencies, among other forms of stores of value, as a means of protecting themselves from inflation.
However, investors may be leaning away from traditional hedges against inflation as there were significant withdrawals from gold ETFs in October. Furthermore, investors’ lack of interest in the most popular US gold ETFs have fallen by 7% in 2021, with the emergence of alternative investment vehicles, such as Bitcoin, perhaps having an effect.
On this note, prominent crypto trading analyst Plan B highlighted on Twitter: “Forget USD and QE: #bitcoin = 37 ounces of Gold.” Illustrating how Bitcoin’s value in gold ounces has increased steadily since 2010.
Indeed, Bitcoin has gradually emerged as a viable substitute to gold as a store of wealth in 2021, with its price skyrocketing. This year, Bitcoin ROI has surpassed most commodities, stocks, currencies, and indices.
Related video: Acheson: The market is struggling to come to terms with what Bitcoin is