The argument for Bitcoin as an effective hedge for inflation has been a long one in the making and so far, the digital asset has not failed those who have a stake in it. Bitcoin’s returns over the past couple of years have been far greater than the rate of inflation, which currently sits at over 6% and is predicted to grow even more in the coming months. This has solidified the asset’s position as the best hedge for inflation.
However, Bitcoin has found another competitor for this title. Ethereum is the second-largest cryptocurrency by market cap and has outperformed bitcoin on a year-over-year basis. The digital asset does not yet command the respect that bitcoin does, but a new study shows that this will soon change. According to findings, Bitcoin may see itself replaced by Ethereum as the better inflation hedge.
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Why Is Ethereum A Better Inflation Hedge?
A new study carried out by researchers from the University of Sydney and Macquarie University has put forward that Ethereum may possess the potential to replace Bitcoin as the leading inflation hedge. The researchers explained that as cryptocurrencies become more accepted mainstream, investors now view the digital assets as a better hedge over gold, especially bitcoin.
The rate of inflation has been raising alarm among investors recently as the Fed has gone into a printing frenzy. There have been calls to stop the printing rate but so far, it has continued, causing inflation rates to shoot up. This is not a concern only the U.S. Other countries around the world are recording similar or even higher inflation rates. This has driven crypto adoption as individuals and institutions flock to take advantage of their return rate.
The Aussie researchers put forward that Ethereum’s recent innovations show that it might become preferred over Bitcoin. Pointing to the upgrade to ETH 2.0 that is scheduled to take place sometime in 2022, the study said that the blockchain shows that cryptocurrencies can become deflationary.
Inflation Driving Crypto Market
It is no secret that growing inflation rates have done a lot to drive crypto adoption in the past year. Experts have warned of the consequences of these rates, such as an increase in food prices and everyday items, which is currently being played out.
ETH readies to to test $5K | Source: ETHUSD on TradingView.com
As for a way for the average person to protect themselves against inflation, gold has fallen out of favor. For the longest time, the shiny rock has been the preferred method of hedging for inflation among investors but seeing as the asset has consistently recorded negative returns in the past few years, it is no longer serves the purpose for which it was once largely desired.Featured image from The Daily Hodl, chart from TradingView.com