Inflation - Bitcoin als Absicherung

It's the beginning of a brand new year, and Bitcoin is already gathering important predictions for 2022. President Nayib Bukele of El Salvador shared his own predictions that Bitcoin will not only reach 0,000 in the new year, but that at least two other countries will adopt Bitcoin as legal tender, as El Salvador did just last year.

These New Year's forecasts follow the year-end optimism shown by Cathie Wood of Ark Invest Management and Jesse Powell, CEO of crypto exchange Kraken, with price predictions of 0,000 and 0,000, respectively, expected to close in 2021. A shift in the market is evident as gold holdings in central banks' foreign exchange reserves around the world are growing significantly, while at the same time US dollar holdings have fallen sharply.

The Continuing Influence of 2008

A central bank's shift to gold reflects global concerns about the so-called dollar-based currency regime, particularly in emerging markets. Beginning with the market crash in 2008 and after the financial crisis, both central banks and public institutions began to increase gold holdings. The crash caused an outflow of funds from US Treasury bonds, which subsequently led to the falling value of dollar-denominated assets. According to market analyst Itsuo Toyoshima, confidence in dollar assets collapsed.

A hedge against inflation with a growing fan base

Inflation in the United States has reached 6.8%, the highest in 40 years, and it seems that previously anti-crypto investors have decided to get employed. Thomas Peterffy, founder of Interactive Brokers Group Inc. and estimated at around billion, claims that 2-3% of your portfolio of crypto assets is the way to go, just in case fiat "goes to hell."

Peterffy's firm also began offering customers the ability to trade a variety of cryptocurrencies, including Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. The transition is the result of increased customer requests for such an option, as the company is looking to add up to 10 more cryptocurrencies to this list in January 2022.

Ray Dalio, founder of Bridgewater Associates, also chimed in: "Cash that most investors consider the safest investment is, in my opinion, the worst investment". Dalio sees crypto investments for their potential as alternative money, saying "cash is garbage" amid global developments where inflation is eroding purchasing power.

Peterffy and Dalio aren't the only billionaires scaling their crypto holdings. Hedge fund manager Paul Tudor Jones claimed it was a hedge against inflation and also bought Bitcoin in 2021.

The rise of Bitcoin City

Bitcoin's move into mainstream adoption is also aided by its merging with culture. Home to the Los Angeles Lakers and the late Kobe Bryant, the iconic Staples Centre, making it a beacon of LA and sports culture, will be known as the arena for the next 20 years after the Singapore cryptocurrency exchange signed a deal with AEG, owner and operator of the arena.

In addition, El Salvador became the first country to adopt Bitcoin as legal tender in 2021 under Bukele's presidency to counter growing inflation. El Salvador is now planning to begin building a Bitcoin city, in addition to issuing volcano bonds, both of which are scheduled for this year.

As investors steadily move away from the dollar and turn to crypto, strengthening its reliability as a hedge against inflation, their actions also shed light on the current sentiment and status of the U.S. dollar.