Bitcoin Becomes Another Inflation Hedge, Bank of America Says

Analysts at Bank of America have noted the growing correlation between gold and bitcoin (BTC). In a new report from the US bank shows that the correlation between gold and bitcoin has been increasing since mid-August. According to the analysts, this shows that investors are starting to see bitcoin more as a… inflation hedgee then a risk asset.

Bitcoin correlations change

Earlier this year, the bitcoin price correlated strongly with stock markets such as the S&P 500 and the Nasdaq, but this is now gradually changing. Investors are starting to recognize the quality of bitcoin as the digital gold again.

Bank of America’s findings are consistent with similar surveys conducted in recent weeks. For example, analysis firm Kaiko noted that in times of current inflation, bitcoin is beginning to behave more and more as an inflation hedge. For example, the stock markets fell faster than bitcoin in the last year, while this was the other way around earlier this year. Kaiko’s data shows that the bitcoin price fell by about 3 percentage points in September while the S&P 500 and Nasdaq fell a lot more sharply at around 7 and 9 percent. Gold still appears to be the inflation hedge of choice for investors, the precious metal falling just 1.27% over the same period.

Institutional bitcoin adoption

Bitcoin was for years touted as a digital version of gold, but lost that status this year when it mostly fell along with stock markets. Now investors seem to be recognizing these qualities of bitcoin again.

The growing correlation between bitcoin and gold comes at a time of accelerated institutional adoption of crypto. Last week, John D’Agostino of crypto exchange Coinbase indicated in an interview that the institutional adoption of crypto is moving very quickly. According to D’Agostino, there is increasing interest in bitcoin from previously uninterested institutions. He did indicate that the adoption of a spot bitcoin exchange trading fund (ETF) would be positive. According to him, most financial institutions simply want bitcoin exposure without worrying about keeping their crypto assets safe.

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