Cryptocurrency News

How Do You Defend Against Inflation? Bitcoin or Gold?

By January 16, 2021 No Comments

Key highlights:

  • The global pandemic has produced a tailwind for the Bitcoin market
  • Investors are flocking to safe havens like Bitcoin and gold due to quantitative easing policies

COVID-19 shocked the world in 2020, and governments responded to the pandemic by printing more money. Governments around the world have already deployed stimulus packages, and additional measures are on the way. Now, many experts are worried about the consequences of the quantitative easing policy in the post-pandemic world. 

The situation has forced many investors to seek safe-havens to protect against the potential devaluation of currencies. Bitcoin and gold are two safe havens for investors. The investors want to protect themselves against future debasement, expecting a weakened position for the US dollar and  other fiat currencies. 

Bitcoin as a store of value

The pandemic resulted in a macroeconomic context that turned out to be ideal for BTC, and the world’s largest cryptocurrency has attracted the attention of many investors. Many institutional investors are joining Bitcoin, and they have understood the potential of BTC as a store of value. 

Paul Tudor Jones expressed a bullish stance on BTC after the halving, and he was one of the early institutional investors who paved the way for other institutional players to enter the market as well. Now, we even see publicly-traded companies like MicroStrategy in the area. 

The market infrastructure of Bitcoin has improved a lot in the recent two years, and the asset itself has many attractive qualities – BTC is decentralized and distributed, and the network cannot be influenced by any single entity. BTC has capped supply, which will ensure that it remains scarce. The demand for BTC has been growing for the past decade, but the maximum supply of Bitcoin is fixed – this presents a bullish scenario for the cryptocurrency.

Bitcoin has some challenges on the way, though. Regulatory challenges are likely the most important factor. In this area, the United States is highly influential and their decisions are being closely monitored by cryptocurrency investors across the globe.

BTC adoption in 2020 was massive, and Bitcoin now seems to be in a prime position for price appreciation. Institutional investors have started joining the space, and retail investors will join the caravan soon. 

Gold is another haven for the investors

Gold is another safe haven, and it is much less risky than Bitcoin – it has a 5,000+ year track record, while Bitcoin has only been around for a decade.

Gold has proved itself as a store of value in the past. Currency debasement is an essential risk, and many investors choose gold to hedge against that possibility. Future depreciation of fiat currencies and interest rates are two crucial factors that drive the price of gold.

However, investors that are willing to take more risks for the chance of bigger upside are increasingly looking to Bitcoin as a viable alternative to the precious metal.