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The rich get richer: Rethinking Bitcoin’s power as an inflation hedge

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Kay Khemani
Contributor

Kay Khemani is the managing director of Spectre.ai

From turkeys to gasoline, clothes to dollar stores, nearly every avenue of human activity has been hit by the specter of inflation. Across the globe, rising inflation rates are disrupting purchasing plans and spending.
In the face of this inflationary inferno, consumers and institutions holding devaluing fiat currency have sought out alternatives to hedge against. Bitcoin and many other cryptocurrencies are the current weapons of choice, driving the U.S. Securities and Exchange Commission to embrace crypto as an investable asset class.
Bitcoin has witnessed strong year-to-date returns, outshining traditional hedges by rallying over 130% compared to gold’s meager 4%. In addition, increased institutional adoption, sustained appetite for digital assets based on weekly inflows and growing exposure in the media strengthened bitcoin’s case among weary investors.
If these are the moves being made by big money, they must be smart moves. However, while the prospect of hedging against bitcoin may seem enticing to retail investors, certain lingering question marks remain over its viability in mitigating financial risk for individuals.
Miscalculated expectations
The ongoing discussion of bitcoin as an inflation hedge needs to be prefaced with the fact that the currency is often susceptible to market jitters and gyrations: Bitcoin’s value plummeted over 8 …

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