Bitcoin transactions have surpassed the $36bn-milestone as the prime cryptocurrency became a hedge against the growing inflation.
Mark Kolanovic, one of JPMorgan’s top analysts, predicted an “inflation shock” that the unprepared portfolios and inexperienced investment managers will imminently face soon enough. The analyst published a note titled “Positioning for Inflation,” where he elaborated on the “rotation towards a relation,” inflation, and rising yields. He states that at “the risk of more persistent inflation,” the portfolio managers will want to reposition their assets.
Mr. Kolanovic called the Fed’s easy money policy “stretching the rubber too long.” The soaring inflation leaves the investors with one question. Is it a one-time shock or a persistent trend? JPMorgan analyst is still confident that either way, the shift in asset allocation will definitely happen, and the inflation will cause investors to prefer value to low volatility, thus “increase allocations to direct inflation hedges such as commodities.”
Warren Buffett, the conglomerate company Berkshire Hathaway CEO, has a similarly grim outlook on inflation. The business tycoon also notes that the US economy may be beyond the point of no return. Although Mr. Buffet is a known skeptic of cryptocurrencies, many experts and investors believe bitcoin can provide the much-needed hedge against the looming inflation.
Crypto Transaction Volume On The Rise
As the investors turn from low volatility to value, trading is booming on the cryptocurrency market. The transaction volume for bitcoin has soared and surpassed the $36 billion margin. It is indicated with a green line on the chart below.
Some analysts argue that the Fed’s easy money policy creates inflation by increasing the money supply. As Bitcoin has a fixed supply of 21 million coins, it is more capable of resisting inflation.
According to Financial Times, trading on major crypto exchanges increased almost 1.5 times in the last month. Now standing at $1.7 trillion. And 17 times over the past year, compared to the $100 billion in April 2020.
Some experts believe that the growing adoption of bitcoin decreases its volatility, thus making it even more attractive for investors and traders. During the New York session on Friday, BTC was trading at $55,797. The flagship cryptocurrency is still in a consolidation phase since March 2021.
Amid the inflation shock that threatens the economy with dire consequences, the crypto market is booming, as indicated by the rapid rise in transaction volume. If the purchasing power of USD decreases, bitcoin, and other cryptocurrencies can possibly supply a hedge against inflation.