Bitcoin could be the next big inflation hedge
As reports arrived in the UK in mid-June warning that inflation rates had fallen to a four-year low, high-profile fund managers were concerned that the COVID-19 stimulus from governments and central banks would eventually drive up prices.
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In a recent note on the market outlook, renowned hedge fund investor Paul Tudor Jones warned that
„We are witnessing ‚high monetary inflation‘, an unprecedented expansion of all forms of money like no other development the world has ever seen. The high debt accumulated by printing money is difficult to eliminate. Inflation expectations could one day respond to this reality.
Crispin Odey, the founder of London-based Odey Asset Management, also agrees that inflation is ultimately inevitable given the level of stimulus. „In the short term, the money will be made on the inflation bet,“ Odey wrote in a recent letter. With potential inflation apparently on the Bitcoin Circuit horizon, investors are looking for the next big hedge to protect their assets during the nascent economic crisis.
Is Bitcoin the new gold?
Jones, for example, has decided that one way forward is to invest his fund, Tudor Investment Corporation, in Bitcoin (BTC). „If I have to make a forecast, my bet is that it will be Bitcoin,“ Jones said in the same letter to investors. „Bitcoin reminds me of gold when I first entered this business in 1976.
After the U.S. Federal Reserve indicated on June 10 that interest rates will remain close to 0% until 2022, Bitcoin experienced a short term of more than USD 10,000, gaining 1.6% in 24 hours before falling back.
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Institutional investment managers have been increasingly interested in all things crypto-currency in recent years, and their interest continues to grow. A recent report from Fidelity, shows that in a survey of nearly 800 institutional investors in the US and Europe, 45% of companies in Europe say they have active crypto. Fidelity continues:
„The survey revealed increased entry into hedge funds and encryption risk, as expected, but also with the financial advisor, individual office and high net worth family segments“.
Consumers are also showing increasing signs of interest, as the UK’s Financial Conduct Authority reports that approximately 2.6 million people have purchased crypto assets at some point, almost double the number reported last year.
Investors in general can take advantage of these same trends and realize the benefits of inflation hedging through Bitcoin. But access to the crypto-currency markets can be extremely complicated at times, with crypto-currency exchanges charging their users high fees for the privilege. However, in recent years, there has been a certain maturation of the crypto markets. Now, more user-friendly and consumer-friendly platforms have been created, which provide immediate and secure access to cryptomonkets at the best price. Users of these platforms can benefit by instantly and effortlessly exchanging their money for competitively priced digital currencies and monitoring their balances in real time.