Bitcoin may have more anti-inflation credentials than Meet the Eye

One of the results of persistent inflation is debate about which assets provide adequate protection against rising consumer prices.

As inflation proved to be more persistent than transitory, there was hope that bitcoin would be additive to investors’ inflation-fighting toolkit. After all, the largest cryptocurrency is often referred to as digital gold. However, Bitcoin fell throughout the first half of this year, prompting some market participants to doubt the asset’s ability to hedge against inflation.

Still, some market watchers see things differently, and if their views ultimately turn out to be accurate, there may be merit in considering exchange-traded funds such as Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BLKC). Steven Lubka, managing director of private consumers at Swan Bitcoin, is among those who believe that bitcoin can be an inflation buffer.

“According to Lubka, Bitcoin works well as a hedge against rising prices when inflation is caused by money growth. It is less effective when inflation is caused by the disruption of food and energy supplies, which he sees as the leading cause of this year’s rampant inflation,” Marco reported Castrovilli for CoinTelegraph.

BLKC, which tracks the Alerian Galaxy Global Blockchain Equity, Trusts and ETPs Index, is home to 63 holdings, making it a broad spectrum of a potentially long-lasting bitcoin recovery, as well as an avenue for investors looking to gauge the digital asset’s inflation-fighting shelf life .

BLKC’s direct bitcoin exposure is obtained via a 13.09% allocation to Grayscale Bitcoin Trust BTC (GBTC). In addition, the Invesco ETF is home to shares of several bitcoin miners. These stocks were rejected in the first half of 2022 when the price of the digital currency fell.

However, some analysts say that some of the higher-quality bitcoin miners may now offer valuation opportunities, and as the digital assets return, some BLKC mining holdings are likely to follow suit.

As for inflation, Swan Bitcoin’s Lubka says that bitcoin may ultimately prove to be more effective at staving off inflation than it is currently being given credit for.

“He also points out that Bitcoin is a better hedge against inflation than stocks or real estate since it needs no maintenance, nor is it affected by the risks involved in stock picking,” according to CoinTelegraph.

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vettafi.com is owned by VettaFi, which also owns the index provider for BLKC. VettaFi is not a sponsor of BLKC, but VettaFi’s affiliate receives an index license fee from the ETF sponsor.

The opinions and forecasts expressed herein are solely those of Tom Lydon and may not materialize. Information on this website should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any product.