Is Bitcoin a good hedge against inflation? According to new research, it depends on who you ask and, more importantly, where they live.
People who live in a country with local currency The value has dropped by more than 50% The price for the US dollar over the last decade, including South Africa, Mexico, India and Brazil, was five times more likely to say that they plan to buy cryptocurrencies next year. Survey released by crypto exchange Gemini on Monday..
In regions suffering from long-term hyperinflation, such as Latin America and Africa, nearly 60% of respondents said “cryptocurrencies are the future of money,” and 46% of the same region said “certain cryptocurrencies are. It’s a great way to protect against inflation. “
In contrast, only 15% (15%) of US respondents and 16% (16%) of the European Union said cryptocurrencies prevent inflation.
“Our conclusion can be considered that if a country has a stable currency, it has most cryptocurrencies,” Gemini Chief Operating Officer Noah Parleman told Yahoo Finance. Must have “
The survey, conducted from late November to February, found 29,293 adults in 20 countries with annual household incomes of $ 14,000 or more.
Bitcoin is often touted by supporters as a hedge against inflation called “digital gold.”
If you think about it, the value of government-issued currencies will decline over time due to central bank funding, but Bitcoin will resist this devaluation due to its fixed supply of 21 million units. The original white paper showed a future in which cryptocurrencies would be “totally inflation-free.”
However, since January, cryptocurrencies have closely reflected the performance of other risk-on assets, with Bitcoin (-4%) more closely correlated with the S & P 500 Index (-4.4%) than external gold. However, ether (-8%) keeps pace with NASDAQ (-8%).
According to Coinmetrics, the 60-day correlation of BTC with S & P 500 has increased since January, and the 30-day correlation shows higher mirroring of about 70 basis points. It fell temporarily in the first week of March after sanctions were imposed on Russia in the invasion of Ukraine...
Steve Hanke, a professor of applied economics at Johns Hopkins University and a critic of cryptocurrencies, downplays the use of crypto as an inflation hedge, but the findings still make sense. Stated.
“When inflation rises, currency substitution is rampant. Everyone wants to be a currency that always breaks out of their junk currency and maintains purchasing power. In that respect, the US dollar is the king,” Hanke said. “Cryptos is just an interesting footnote,” he added, as he told finance that it is highly volatile and speculatively used.
However, Noelle Acheson, Head of Market Insights at Genesis Trading, has yet to prove that Bitcoin is being used as a true inflation hedge due to lack of historical evidence, but its risk-on behavior as well. He pointed out that it is “essentially a short-term observation”. “
She also showed that African respondents were least likely to worry about Bitcoin volatility and lack of government support, and Latin American respondents were least likely to worry about lack of “trust”. I pointed out the results of the survey.
Alex Thorn, Head of Research at Galaxy Digital, said that while Bitcoin has gold-like properties, Bitcoin is rare, globally accepted, and unsupported by the government. Bitcoin is a future option that will be treated like digital gold. ” It is a product like. “
“Even if a transaction starts like gold, we don’t know when the shift will occur,” he said. Many investors are aware of the potential of Bitcoin and therefore treat it like a risk asset. “
David Hollerith describes Yahoo Finance’s cryptocurrency.Follow him @dshollers..