As the traditional market fall threatens further due to the lasting COVID-19 pandemic, investors are starting to look at the challenges that lie ahead.
The GDP of every major economy is expected to suffer in the current quarter. Many are hopeful that recovery will come in the next quarter but there is potential for long-term recession.
However, investors are beginning to looks for an alternative means of investment to cushion the effect. One area where investors are turning to is cryptocurrencies and in particular Bitcoin. In recent times, there has been influx of institutional investors’ fund in the crypto market, and Investment firm Grayscale can testify.
In a recent report by Grayscale, it was revealed that crypto-assets has emerged as a stimulus for investors.
A chart by Grayscale on Twitter, revealed the comparison between Gold, Bonds, SPX and BTC, clearly showing that BTC has been adopted by investors in recent time as a potential hedge against inflation.
Grayscale noted that crypto asset has proved resilient in this crucial time, giving investors reasons venture into it. the investment firm added the potential surge in the crypto market has made investors turn unto Bitcoin as a potential hedge against inflation.
As we’ve closely monitored the market in the wake of recent economic policy decisions, we've seen that the crypto asset class is not only resilient, but that interest is surging as the monetary stimulus has caused investors to look to $BTC as a potential hedge against inflation. pic.twitter.com/ZQn6ZIoRFQ
— Grayscale (@GrayscaleInvest) June 15, 2020
Bitcoin Investment: Hedging Against Inflation
Accordingly, investors are searching for assets that can provide a hedge against the dreadful impact of inflation. This is shown in the chart above where the S&P 500 is nursing a loss of around 10% even after the recent Fed inspired rally. This shows how low the stock market has been since the beginning of the year.
The price of Gold is up 10% to the date of writing which is not surprised since it is regarded as a major hedge against inflation. But this time Gold will not be the only save haven from the Covid-19 financial storm as Bitcoin is available for investors.
Bitcoin has shown that it can live up to its reputation as digital gold and keep value while cash crashes and bonds yield turns negative. Bitcoin offers an inflation hedge for one obvious reason: unlike fiat currencies, the supply is limited with only 21 million Bitcoins mine-able in total.
There is no digital central bank that can debase the value by flooding the market. The decentralised nature means that the decisions of a few power-brokers cannot fundamentally alter the value of people’s holdings.
Although the price of Bitcoin has struggled to surpass the $10,000 barrier there are signs that an extended bullish rally could be on the way, potentially increasing investors gains.