Investors are trading their choice of gold for cryptocurrencies as inflation rises in the United States, fleeing a metal that is historically known as a store of value to buy digital assets just over a decade old, primarily Bitcoin, the world’s largest cryptocurrency. biggest in the world.
More than $ 10 billion has been withdrawn from the largest exchange-traded gold fund this year and the funds’ physical gold reserves have also been selling off, according to Bloomberg data. The price of gold has fallen by almost 5 percent in the last 12 months. On the other hand, Bitcoin almost managed to double its price in the same period. This is why investors have started to see Bitcoin and other cryptocurrencies as a hedge against inflation.
While the cryptocurrency market is experiencing a time of high volatility, Bitcoin is gaining against gold as the most preferred asset as a store of value. The drop in prices in the crypto market may be the result of investors’ fears amid reports of imminent closures due to the Coronavirus in different countries.
John Hathaway, Senior Portfolio Manager at Sprott Asset Management, a precious metals investment group, said: Veteran gold investors recognized that times are changing. There is no interest in our strategy at this time, adding: “Proponents of bitcoin see the same things that I see in terms of the inflation risks of printing money.”
Gold has long been promoted as a hedge against the declining purchasing power of fiat currencies such as the dollar or the euro. Stifled demand, strangled goods supply chains and stimulus from the central bank have revived the inflationary concerns that have generally supported gold markets. Paul Tudor Jones, the expert hedge fund manager, told CNBC that he prefers cryptocurrencies to gold as a hedge against inflation. “Clearly, there is a place for cryptocurrencies. Clearly, he’s winning the race against gold right nowJones said.
According to Fidelity’s latest Institutional Investor Digital Asset Study, which surveyed 1,100 professional investors, the lack of relationship between bitcoin’s price movement with other asset classes and the perceived potential as a hedge against inflation added to its popularity. in the most important cryptocurrency.
More than half of hedge funds surveyed in Europe and the United States said rising inflation was the main driver of their attraction to digital assets, and nearly eight in ten of investors surveyed said that cryptocurrencies have a place in a portfolio. “Institutional investors seem to be turning to bitcoin, perhaps seeing it as a better hedge against inflation than gold,” analysts at JPMorgan said.
However, gold remains the world’s most valuable asset, and Bitcoin the eighth. Gold currently exceeds 11 trillion in total value, while bitcoin is a little over 1.1 trillion.
Yanina Orrego, CEO of Capital Ediciones, told Infobae: “It is logical that institutional investors prefer Bitcoin because their work benefits more the more profits their funds generate. So, if cryptocurrencies give more today, it is logical that they turn to this new world “, and added:” However, Bitcoin is not the cryptocurrency that has risen the most in price in recent time, it is not even close to be. Cryptocurrencies such as BNB from Binance, CAKE from the decentralized pancake swap exchange, and even memecoins such as Shiba Inu or Dogecoin have seen huge increases relative to Bitcoin. When institutional investors start to take them more seriously, altcoins (cryptocurrencies that are not Bitcoin) will start to have a lot more weight than they are today ”.