Bitcoin and Gold as Hedges Against Currency Debasement
According to global investment bank Jefferies, the collapse of the U.S. dollar could be advantageous for bitcoin holders. In a note to investors, Chris Wood, Global Head of Equity Strategy at Jefferies, highlighted bitcoin and gold as “critical hedges” against currency debasement and diminishing returns from inflation.
Wood pointed out that the Federal Reserve has been raising interest rates at an unprecedented pace in an attempt to control soaring inflation. However, he believes that the central bank may be forced to adopt a dovish stance due to a potential U.S. recession and the mounting $33 trillion U.S. debt.
The Collapse of the U.S. Dollar and Benefits for Bitcoin
Jefferies warned that G7 central banks, including the Federal Reserve, will struggle to exit from unconventional monetary policies smoothly and will likely continue expanding their balance sheets in some form. This failure could lead to the collapse of the U.S.-dollar paper standard, benefiting both gold bullion owners and bitcoin holders.
Wood advised investors to view their gold and bitcoin holdings as insurance rather than short-term trades. He also recommended that long-term global investors allocate 10% of their portfolios to BTC. Wood emphasized that bitcoin has become investible for institutions, with custodian arrangements in place for digital assets.
Hot Take: The Future of Bitcoin in an Unstable Economic Landscape
In an uncertain economic landscape, with concerns about inflation and currency debasement, analysts like Chris Wood see potential benefits for bitcoin holders. As central banks struggle to exit unconventional monetary policies smoothly, the collapse of the U.S.-dollar paper standard becomes a possibility.
This scenario presents an opportunity for both gold bullion owners and bitcoin holders. As a result, investors are advised to consider bitcoin and gold as hedges against currency debasement and to allocate a portion of their portfolios to BTC.
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