Bitcoin can be a useful hedge against inflation in the near future as market uncertainty grows. In the long term, it may be useful to imagine Bitcoin differently as an indicator of the technology industry.
The Digital Asset Research Director of Standard Chartered and the Growth Director of WeFi shared an exclusive opinion with BeInCrypto on this topic.
Bitcoin, Inflation Hedge... Candidate for Magnificent 7?
Since the early days of the cryptocurrency market, investors have been using it as a hedge against inflation. However, only recently have institutional investors begun to treat it in the same way. According to Jeff Kendrick, Digital Asset Research Director of Standard Chartered, the trend of using Bitcoin as an inflation hedge is increasing.
However, this perspective may be too narrow in some aspects. Since Bitcoin ETF was first approved, BTC is becoming increasingly integrated with traditional finance. Kendrick mentioned that it has a high correlation with Nasdaq in the short term. He argued that Bitcoin can play a role beyond an inflation hedge and instead act as an alternative technology stock:
"BTC might be better viewed as a technology stock rather than a hedge against traditional financial issues. If we were to create a hypothetical index and add BTC to the 'Magnificent 7' tech stocks while removing Tesla, our index 'Mag 7B' would have higher returns and lower volatility than Mag 7." – Jeff Kendrick, Digital Asset Research Director at Standard Chartered
This comparison is particularly appropriate for several reasons. Tesla's stock price is deeply intertwined with Bitcoin but is declining due to political controversies. Bitcoin could be welcomed if it replaces Tesla's position in the Magnificent 7. Of course, there is currently no mechanism to neatly treat Bitcoin as a similar type of product. This could change.
However, Bitcoin's role as an inflation hedge may be more immediately relevant. As Trump Liberation Day approaches, the cryptocurrency market is becoming increasingly tense about new US tariffs. Agne Lingė, Growth Director of WeFi, said in an exclusive interview that these fears are affecting all risk assets, including Bitcoin.
"The cryptocurrency market is closely tracking investor sentiment ahead of Trump's tariff announcements, with growing concerns about potential economic impacts. As Bitcoin's correlation with traditional markets increases, its exposure to broader macroeconomic trends has expanded, making it more sensitive to risk-averse sentiment that has affected the stock market." – Agne Lingė, Growth Director of WeFi
She said that US economic uncertainty has reached an all-time high beyond the 2008 financial crisis and the April 2020 pandemic. In this context, recent inflation indicators are showing higher-than-expected rates.
In this environment, the cryptocurrency market will clearly be hit, but traditional finance and the dollar are also at great risk. This means that Bitcoin is likely to be a reliable inflation hedge in the near future. Even if it falls significantly, Bitcoin remains attractive globally and has the ability to recover.
