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Bitcoin “Inflation Hedge” Argument Is a Fairy Tale Used By Speculators: Andrew Sorkin

Andrew Sorkin of CNBC suggests that investors are not embracing Bitcoin (BTC) as a hedge against inflation. In an interview on April 1 with Anthony Pompliano, founder of Pomp Investments, they discussed the validity of BTC’s perceived function as a “risk-off” asset, deliberating whether it is grounded in reality or merely a narrative fueled by speculators.

Bitcoin: Risk On Or Inflation Hedge?

Pompliano contended that Bitcoin holds varying significance for different individuals. “I think for some people it’s a risk-on asset, and for other people, it is a hedge against inflation or a store of value,” he stated.

In its historical trajectory, the price movements of Bitcoin (BTC) have closely mirrored those of high-risk tech stocks and the Nasdaq, while also demonstrating sensitivity to prevailing macroeconomic policies. Comparisons to gold as a “risk-off” inflation hedge asset have been drawn by value investors, citing Bitcoin’s finite supply, utility as a form of currency, and incorruptible nature.

Pompliano asserted that Wall Street investors, who are increasingly accessing Bitcoin through newly popular spot ETF products, are likely primarily attracted to its potential for high growth.

Simultaneously, individuals in less politically stable regions may view Bitcoin as a means to safeguard their wealth, as the asset cannot be seized through traditional means of force.

Bitcoin’s Real Adoption

Sorkin, however, expressed skepticism regarding the latter argument. Drawing from his experiences in South Africa and Zimbabwe, where he engaged with locals from various economic backgrounds about their cryptocurrency purchases, he noted a consistent trend of negation. “Almost to a tee, they said no,” claimed the anchor. “Then I went to look at the flows, and it also is true that they’re not.”

“The math does not suggest that the hedge argument on inflation is actually a real one,” he continued. “I just wonder whether it’s sort of used to sprinkle fairy dust to other people who then are speculating and want it, obviously, to go up.”

Pompliano countered by emphasizing geographical variations. He pointed to Nigeria as an example, citing its high crypto ownership rates, ranking among the top 3 in the Chainalysis Global Crypto Adoption Index.

Furthermore, authorities in Nigeria have recently taken action against Binance, imposing fines and detaining some of its executives over allegations of destabilizing the nation’s local currency in competition with national rivals and Bitcoin.

“You don’t have to go to emerging markets to find a reason why people wanna buy this,” Pompliano added, asserting that Bitcoin trades in a “forward-looking” manner, aligning with increasing month-over-month inflation figures.

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I want to save money. Will cryptocurrency work?

Cryptocurrency is essentially virtual money that operates in a decentralized manner, not through a bank but directly on multiple independent computers.

Every cryptocurrency has two main components: the units of digital exchange called “coins” and the network within which the exchange takes place. These units can be transferred between wallets and exchanged on exchanges. The networks in which these coins exist are called blockchains, which translates to “chains of blocks.”

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