Bitcoin seems soft among hard assets to hedge inflation
- Blog
- April 19, 2022
Bitcoin seems soft among hard assets to hedge inflation
A 50-day correlation coefficient for Bitcoin and gold is nearly minus 0.4, which is the lowest since 2018. A similar measure for the token and the Bloomberg Commodity Spot Index is negative and at a multi-year low. A result of 1 indicates that assets are moving in lockstep, whereas a reading of -1 suggests the opposite.
So, whereas commodity success has been catalyzed by demand for portfolio buffers against price pressures, Bitcoin is making the store-of-value narrative more challenging to sell.
It’s possible that investors are choosing tradition over a new frontier as Bitcoin is tested in high inflation, rising rate environment for the first time.
Bitcoin proponents are unfazed, claiming that the cryptocurrency will establish its worth over time, thanks in part to a limited number of 21 million units.
In a recent Bloomberg Television interview, MicroStrategy Inc. founder Michael Saylor stated he can’t think of “it is better to position our company in an inflationary climate than to convert our financial sheet to Bitcoin.”
For the time being, Bitcoin and the Nasdaq 100 index are highly correlated, and investors have abandoned the token and the technology-heavy index in 2022, concerned about risk appetite being harmed by drastically tighter US monetary policy.
This year, the Nasdaq 100 has lost roughly 15% of its value, while the world’s largest cryptocurrency has lost about 16%. As of 11:55 a.m. Monday in London, the token had dropped 3.3 percent to around $39,000, a one-month low.
