For some time now, there has been a heated debate among financial experts as to whether Bitcoin can be considered a better financial instrument than gold against the risks of periods of high inflation, such as the current one.
Bitcoin better than gold against inflation
The limited production of the number of Bitcoin in circulation, set by its mysterious creator at 21 million pieces, (currently there would be 18.9 in circulation) is certainly one of the main conditions that makes it a good tool as a hedge against inflation.
Besides, as billionaire hedge fund manager and philanthropist Paul Tudor Jones pointed out in late October in an interview with CNBC, Bitcoin has proven in fact to be a much better tool than gold as an anti-inflationary instrument.
“It would be my preferred one over gold at the moment. Clearly, there’s a place for crypto. Clearly, it’s winning the race against gold at the moment”.
Indeed, when analyzing the prices of gold and Bitcoin in 2021, it is clear that while gold lost about 7%, Bitcoin gained about 300%.
The Arcane Research report
But to reinforce this thesis, research by specialist firm Arcane Research has now come to light, reporting that Bitcoin has been an “excellent” hedge against inflation during the pandemic,
The report reads:
“Over the same period, gold had a real return of 8%, while the S&P 500 returned 33% in real terms. Bitcoin’s unparalleled returns during this highly inflationary period illustrate that Bitcoin has indeed been an excellent hedge against inflation.”
To reinforce this thesis, Arcane researchers explain how Bitcoin’s purchasing power since January 2020 has increased by 520%.
The future performance of Bitcoin prices could be affected by the US Federal Reserve’s tapering announced on Wednesday to combat and cool down the rise in inflation, which now seems unstoppable in the US.
Further evidence of Bitcoin’s high inflationary power is the fact that its adoption is growing especially in countries that have long suffered from very high inflation rates, such as Venezuela, Argentina, Zimbabwe, Brazil or Sudan.