Bitcoin's appeal as a hedge against ongoing inflationary pressures is increasing, analysts say
Quick Take
- Bitcoin’s safe haven status is becoming more attractive as inflation levels remain persistent, according to an analyst.
- The price of bitcoin has held above the $51,000 mark for over one week, according to The Block’s Price Page.
Bitcoin 
BTC
+4.22%
is emerging as an attractive choice for portfolio diversification in a macroeconomic climate were inflation remains persistent, analysts said.
Bitfnex Head of Derivatives Jag Kooner said that a variety of macroeconomic headwinds in 2024 could enhance the safe-haven status of assets like bitcoin, gold and silver. "Persistent inflation levels, remaining above the comfort zones of central banks around the world, are anticipated to result in a prolonged period of higher interest rates. This scenario is likely to temper current market expectations for an early easing of monetary policies in developed markets, which may lead to some disappointment among investors," he added.
In an email sent to The Block, Kooner outlined various headwinds that could frustrate market growth in the year ahead. "Looking ahead to 2024, the outlook for equity markets appears more challenging. Factors such as modest earnings growth and various geopolitical risks are expected to exert downward pressure on stock markets," he added.
His forecast is that 2024 will be a year of only modest growth. "There may only be modest earnings growth for the S&P 500, in the range of 2% to 3% and a target of 4,200 for the index, with a downside bias," he said.
Potential macroeconomic headwinds
TRES Co-Founder Tal Zackon told The Block that newly approved spot bitcoin ETFs are making it easier for traditional investors to use bitcoin as a hedge against inflationary pressures.
RELATED INDICES
Zackon also outlined a number of factors supporting bitcoins status as a safe haven amid uncertain macroeconomic conditions.
"The upcoming bitcoin halving in April, a unique mechanism limiting supply, reaffirms bitcoin's potential as a potent anti-inflation tool," he added.
The upcoming bitcoin halving event
The next bitcoin halving, slated for April this year, will cut the miners' reward for validating and adding new blocks to the blockchain by 50%.
This halving event, which occurs roughly every four years or after every 210,000 blocks mined, aims to reduce the block reward. The previous halving in 2020 decreased the reward from 12.5 bitcoin to 6.25 bitcoin.
After approximately 840,000 blocks are mined, the upcoming halving will further reduce the block reward from 6.25 BTC to 3.125 BTC per block. This built-in feature of the Bitcoin protocol helps manage the new bitcoin supply, gradually making it scarcer.
Bitcoin was changing hands for $50,890 at 5:40 p.m. ET, according to The Block's Price Page. The GM 30 Index, representing a selection of the top 30 cryptocurrencies, slipped 0.92% to 112.43 in the past 24 hours.
The price of bitcoin has fallen by over 1% in the past 24 hours. Image: The Block.
Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.
© 2023 The Block. All Rights Reserved. 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.
