According to CNBC’s Andrew Sorkin investors aren’t buying Bitcoin (BTC) as an inflation hedge.
During an April 1 interview with Pomp Investment founder Anthony Pompliano, both debated whether BTC’s theoretical role as a “risk off” asset is a real thing or a mere narrative driven by speculators.
Bitcoin: Risk On Or Inflation Hedge?
Pompliano argued that Bitcoin can mean different things to different people.
“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 said.
Historically, the price of Bitcoin (BTC) has strongly correlated with that of high-risk tech stocks, and the Nasdaq, and has proven sensitive to prevailing macroeconomic policy. Value investors often liken Bitcoin to gold – a “risk off” inflation hedge asset – due to its limited supply, usability as money, and incorruptible nature.
Pompliano claimed that Wall Street investors – who are more likely to buy Bitcoin through its new, highly popular spot ETF products – are likely only buying for its high potential growth.
Meanwhile, buyers in less stable countries may be interested in using Bitcoin to protect their wealth, since the asset cannot be seized through brute force.
Bitcoin provides hope & protection for anyone.
The US dollar has lost 25% of its purchasing power in 4 years, while bitcoin has gained over 800%.
We are watching a global store of value be adopted.
Here is my full segment on @SquawkCNBC this morning. pic.twitter.com/XvO0B4yE0o
— Pomp 🌪 (@APompliano) April 1, 2024
Bitcoin’s Real Adoption
Sorkin said he didn’t buy the latter argument, however, based on his experience in South Africa and Zimbabwe, where he tried asking locals of various economic classes about whether they’d bought crypto.
“Almost to a tee they said no,” the anchor claimed. “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.”
Again, Pompliano argued that it depends on the location. Nigeria, for example, has one of the highest crypto ownership rates in the world and ranks in the top 3 of the Chainalysis Global Crypto Adoption Index.
In fact, the nation’s authorities have recently fined Binance and detained some of its executives for allegedly destabilizing the nation’s local currency against national rivals and Bitcoin.
“You don’t have to go to emerging markets to find a reason why people wanna buy this,” Pompliano continued, claiming that Bitcoin trades in a “forward-looking” manner in line with rising month-over-month inflation figures.