According to an interview conducted by CNBC’s Andrew Sorkin with Pomp Investment founder Anthony Pompliano, there is a debate about whether Bitcoin is being bought as an inflation hedge or as a risk-on asset. Pompliano argued that Bitcoin can serve different purposes for different individuals, with some viewing it as a risk-on asset and others seeing it as a hedge against inflation or a store of value. Historically, the price of Bitcoin has been strongly correlated with high-risk tech stocks and the Nasdaq, making some believe it can serve as a risk-off inflation hedge asset similar to gold due to its limited supply and usability as money.
Pompliano suggested that Wall Street investors are likely buying Bitcoin through new spot ETF products for its high growth potential, while buyers in less stable countries may be looking to protect their wealth by investing in Bitcoin since it cannot be seized through force. However, Sorkin disagreed with this assessment based on his experience in South Africa and Zimbabwe, where he found that locals had not bought crypto and that the math did not support the argument that Bitcoin is being used as an inflation hedge. He questioned whether the hedge argument is used to create a narrative that attracts speculators looking for the price of Bitcoin to rise.
Pompliano countered Sorkin’s skepticism by pointing out that countries like Nigeria have a high rate of crypto ownership and are ranked in the top 3 of the Chainalysis Global Crypto Adoption Index. In Nigeria, authorities have recently fined Binance and detained some of its executives for allegedly destabilizing the nation’s local currency against national rivals and Bitcoin. Pompliano argued that Bitcoin trades in a forward-looking manner and is influenced by rising inflation figures, not just in emerging markets but also in developed countries.
Bitcoin has gained popularity as a global store of value, with the US dollar losing significant purchasing power over the past four years while Bitcoin has seen a significant increase in value. Pompliano highlighted the optimism and protection that Bitcoin can provide to individuals amid economic uncertainties. He emphasized the role of Bitcoin as a safe haven asset that offers security and potential for growth, attracting investors seeking to safeguard their wealth and hedge against inflation. The debate over whether Bitcoin is primarily viewed as a risk-on asset or an inflation hedge continues to be a topic of discussion among investors and analysts in the financial industry.
