The recent gains that have been made by Bitcoin (BTC/USD) and other cryptocurrencies have been attributed to the rising fear of inflation. Many individuals and firms are now using cryptocurrencies as a hedge against inflation, and the rising demand has also caused a rise in prices.
In an interview with CNBC’s Squawk, Adam Parker, the founder of Trivariate Capital Management, stated that investments in cryptocurrencies can be used as a hedge against inflation.
Using crypto as a hedge against inflation
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During this interview, Parker noted that Bitcoin and cryptocurrencies could be used as a hedge against inflation, but investing in these asset classes was not open to all investors.
Moreover, he mentioned getting exposure to crypto investments by investing in companies that already hold cryptocurrencies in their stock portfolio. This will help an investor hold crypto in their portfolio without suffering the risk of the high volatility of these assets.
For instance, if an investor has holdings in the stocks of a company like MicroStrategy, the prices will change depending on the price of Bitcoin. Therefore, investors who do not want to hold crypto directly in their portfolios can track the underlying price of Bitcoin by investing in MicroStrategy.
However, Parker stated that adding crypto-related assets in a portfolio was dependent on a wide range of factors, including an investor’s net worth, alluding that such investments were not ideal for everyone.
Bitcoin, not gold, is a good inflation hedge
The recent debate in the crypto space has been whether gold or Bitcoin makes for a better hedge against inflation. Last month, JPMorgan’s strategists gave several reasons why Bitcoin is superior to gold in this functionality.
The experts noted that while Bitcoin has been suffering from high volatility, it continues to attract investors, with even institutions turning towards the primary cryptocurrency as a better alternative to gold.
Bitcoin is also slowly shifting from just being a speculative asset as it was endorsed by El Salvador as legal tender in September. A recent report also noted that Zimbabwe was also considering using Bitcoin as legal tender. The growing adoption of Bitcoin as legal tender has been attributed to the recent gains above $67K.
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