Institutions prefer crypto to gold as an inflation hedge

As fears of runaway inflation rise across the globe, institutional investors are looking elsewhere than the usual hedges such as gold. Instead, they are looking for another more efficient tool, in the shape of cryptocurrencies. 

Matt Hougan, CIO of Bitwise Asset Management spoke on CNBC Squawk Box Asia today. He spoke first about the furore surrounding Elon Musk and his company Tesla dumping Bitcoin as medium of payment for their electric cars. 

He said that Elon Musk and Tesla has done a lot to embrace cryptocurrencies thus far. He thought that the environmental concerns were not new and that they were “probably misplaced”. He cited the following: 

“40% of all energy that goes into Bitcoin mining is renewable. Three quarters of Bitcoin miners use some renewable energy. It’s actually a force pushing us towards a more renewable future. But the industry could do more to move away from coal and there are other crypto assets like Ethereum that are moving towards a more carbon-neutral approach to this” 

Hougan appeared relaxed as to Tesla’s future participation in crypto and he said that “they will be back”, and that they were only holding crypto in abeyance for the time being. In his view this was just a stage in Tesla’s journey to educate itself of these things, and he was sure that people would help Tesla by informing it of the actual environmental costs over the next few weeks and months. 

When asked if the Musk tweet from yesterday would affect other institutions in their purchasing of Bitcoin, Hougan replied that he thought that perhaps they might look at “a broader array” of cryptocurrencies for their needs. He said that would likely be a “battle in the marketplace for which is the most secure, most environmentally sound approach.” 

He said that what connects institutions to crypto is the efficiencies that this alternative asset class brings to finance and payments. There was a possibility that the negatives around Bitcoin’s energy consumption could slow institutional demand.  

However, he certainly did not think that corporate interest in cryptos would slow down, given their importance as a hedge against inflation. He added: 

“I think that this is a train that keeps going from here’ 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.