Standard Chartered signals the role of Bitcoin as a hedge against rising inflation.

Bitcoin is emerging as a potential hedge against inflation amid increasingly volatile market conditions. Not only is it fulfilling its traditional role, but this cryptocurrency can also be viewed in another light, becoming a benchmark for the future development of the technology sector.

Geoff Kendrick, Head of Digital Asset Research at Standard Chartered, and Agne Linge, Head of Growth at WeFi, shared their views on the role and potential of Bitcoin.

Bitcoin: A Hedge Against Inflation or a Contender in the Magnificent 7?

Since the early days of the cryptocurrency market, Bitcoin has been viewed by investors as a hedge against inflation. However, only recently has this trend garnered attention from institutional investors. According to Geoff Kendrick, Bitcoin is gradually establishing its position as a solution against inflation, especially as Bitcoin ETFs are approved, allowing this coin to integrate more deeply into the traditional financial system.

Mr. Kendrick emphasized that, in the short term, Bitcoin has a high correlation with NASDAQ, which makes it not only a hedge against inflation but also potentially seen as an alternative tech stock.

"Bitcoin can be viewed better as a technology stock rather than merely a tool to hedge against the issues of traditional finance. If we were to create a hypothetical index where Bitcoin is added to the group of technology stocks 'Magnificent 7' and Tesla is removed, the new index, 'Mag 7B', would yield higher returns and lower volatility compared to the Magnificent 7 index," Kendrick shared in an interview.

This comparison is particularly relevant in the context of Tesla stocks facing pressure from political controversies and the close connection with Bitcoin. Replacing Tesla with Bitcoin in the Magnificent 7 group could bring more balance and efficiency. However, there is currently no official mechanism for Bitcoin to be treated as a product similar to technology stocks. This may change in the future.

Bitcoin and the role of inflation hedge

In the short term, Bitcoin is playing an increasingly important role as an inflation hedge, especially as the cryptocurrency market faces concerns over the new tax policies in the US. According to Agne Linge, these concerns are affecting all risky assets, including Bitcoin.

"The cryptocurrency market is closely monitoring investor sentiment ahead of Trump's tax announcement, with growing concerns about the potential economic impact. The increasing correlation of Bitcoin with traditional markets has amplified its sensitivity to broader macroeconomic trends, making it susceptible to the risk-averse sentiment that has affected the stock market," Linge remarked.

She also pointed out that economic instability in the US is at a record high, surpassing even the financial crisis of 2008 and the COVID-19 pandemic in April 2020. In this context, recent inflation indicators are showing forecasts that exceed expectations, increasing pressure on both traditional markets and cryptocurrencies.

Bitcoin: A Tool for Preventing Inflation in the Near Future

Although the cryptocurrency market may be significantly impacted by economic fluctuations, Bitcoin still stands out with its global appeal and strong resilience. While traditional finance and the US dollar face major risks, Bitcoin could become an effective hedge against inflation in the near future. Even when its value decreases sharply, Bitcoin still possesses recovery potential and continues to assert its role in the global financial ecosystem.

Disclaimer: This article is for informational purposes only and is not investment advice. Investors should do their own research before making decisions. We are not responsible for your investment decisions.

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Mr. Teacher

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