Bitcoin May Be a Useful Hedge Against Inflation in the Near Future as Market Uncertainty Is Growing

In the long run, it may also be useful to envision Bitcoin differently, treating it as a barometer for the tech industry.

Standard Chartered’s Head of Digital Assets Research and WeFi’s Head of Growth shared exclusive comments with BeInCrypto regarding Bitcoin and its role as an inflation hedge.

Rising Tariffs and Biden’s Impact on Bitcoin

Since the early days of the crypto space, investors have been using it as a hedge against inflation. However, it’s only recently that institutional investors are beginning to view it the same way. According to Geoff Kendrick, Head of Digital Assets Research at Standard Chartered, the trend of Bitcoin as an inflation hedge is increasing.

Still, this view may be too narrow in a few ways. Since the Bitcoin ETFs were first approved, BTC has been increasingly well-integrated with traditional finance. As a result, it is highly correlated with the NASDAQ in the short term. According to Kendrick, this correlation means that Bitcoin might represent more than an inflation hedge, instead serving as an ersatz tech stock:

“BTC may be better viewed as a tech stock than as a hedge against TradFi issues. If we create a hypothetical index where we add BTC to the ‘Magnificent 7’ tech stocks, and remove Tesla, We find that our index, ‘Mag 7B’, has both higher returns and lower volatility than Mag 7,” Kendrick said.

This comparison is particularly apt for a few reasons. Tesla’s stock price is heavily entangled with Bitcoin’s, but it’s also been dropping due to political controversies. If Bitcoin were to replace Tesla’s position in the Magnificent 7, it may be a welcome addition. Of course, there is currently no mechanism to cleanly treat Bitcoin as a similar type of product. That could change.

However, Bitcoin’s role as an inflation hedge might be more immediately relevant. As Trump’s Liberation Day approaches, the crypto markets are becoming increasingly nervous about new US tariffs. As Agne Linge, Head of Growth at WeFi, said, these fears are impacting all risk-on assets, Bitcoin included.

“Crypto markets are closely tracking investor sentiment ahead of Trump’s ...tariff announcement, with growing concerns over the potential economic impact. Bitcoin’s increasing correlation with traditional markets has amplified its exposure to broader macroeconomic trends, making it more sensitive to the risk-off sentiment that has affected equity markets,” Linge claimed.

She went on to state that US economic uncertainty was at record levels, having surpassed both the 2008 financial crisis and the pandemic in April 2020. In these circumstances, recent inflation indicators are showing expected rates above expectations.

In such an environment, the crypto market is sure to take a hit, but traditional finance and the dollar are also in great jeopardy. All that is to say, Bitcoin is likely to be a solid inflation hedge in the near future. Even if it falls dramatically, it has worldwide appeal and the ability to rebound.