Bitcoin was born in 2008. It was the following year when it was initially used as a currency. So measuring its inflation-fighting track record against gold and other traditional inflation hedges is tricky owing to that youth.
Not surprisingly, that doesn’t prevent critics and investors from engaging in that endeavor. To this point in the cryptocurrency’s short life span, its status as an inflation buffer is arguably mixed, but certainly evolving. That evolution could be an indication that ETFs such as the CoinShares Valkyrie Bitcoin Fund (BRRR ) are worthy of consideration by investors looking for inflation protection.
Likely weighing on bitcoin’s reputation as an inflation buffer is that the largest digital currency tumbled in 2022. That’s when the US Consumer Price Index (CPI) surged. That year, the cryptocurrency traded lower in all four quarters. That including a massive 56.2% drop in the April through June period. Still, some bitcoin proponents believe the asset will avail itself to be a valuable inflation fighter over the long term.
Bitcoin Fund BRRR Could Be Tactical Inflation Hedge
BRRR and other spot bitcoin ETFs are convenient ways for investors of all stripes to own the digital currency. These products are appealing because they don’t require crypto wallets, multifactor authentication. and some of the other tech challenges associated with “old school” bitcoin ownership. Importantly, harnessing the benefits of BRRR doesn’t mean investors sacrifice bitcoin’s inflation-fighting benefits, which include its decentralized status.
“Bitcoin is not controlled by any central bank or politician. It’s a decentralized, peer-to-peer system governed by math and consensus — not by election cycles or political pressure,” wrote HashKey Capital Partner Jupiter Zheng in an op-ed for Coin Telegraph. “In places like Zimbabwe or Venezuela, where governments destroyed their currencies, Bitcoin has offered a more stable alternative. When faith in traditional systems weakens, Bitcoin often strengthens.”
Zheng points out that bitcoin has already proven to be a go-to choice for consumers in countries. These include Argentina, Greece, and Venezuela, which have been hammered by inflation spikes in recent years.
Zheng acknowledges that when it comes to bitcoin and inflation, “speculative hedge” may be the appropriate term to apply to the digital currency. That makes sense, because the cryptocurrency is prone to large price swings. It isn’t appropriate for every investor. But the cryptocurrency and ETFs like BRRR can provide some cushion against financial shocks.
“Bitcoin is best understood as a financial lifeboat. It’s not perfect. It takes effort to use it correctly. It’s a small measure of preparation for life’s unknowns. But when the ship starts sinking, you’ll wish you had one,” concluded Zheng.
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