Bitcoin’s recent all-time high might be the result of more than just market hype and tweets by Elon Musk, with institutional investors adopting cryptocurrencies as a hedge against inflation.

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eToro crypto asset analyst Simon Peters has suggested that the overlap of bitcoin’s recent all-time high and rising inflation in the United States shouldn’t be ignored. 

“Not only is it a signal that the market is extremely averse to inflationary pressure, it is a sign investors are now firmly using bitcoin as a hedge against rising prices,” he said.

Earlier this week, the price of the world’s most popular cryptocurrency surged to a new all-time high of over $69,000 per unit. This resurgence from the lows of April pushed the overall value of the crypto market to over $3 trillion. 

Meanwhile, US consumer prices have recorded their largest year-on-year increase since 1990. 

Mr Peters suggested that bitcoin’s rapid ascent amid growing fears around inflation within the global economy may be a sign that institutional investors are buying the news when it comes to crypto assets.

“This is the sort of movement we’d typically associate with other markets that react heavily to economic news,” he said.

Mr Peters noted that bitcoin is fundamentally structured as a deflationary asset and that the structure has attracted investors looking for ways to protect themselves against the value-eroding effects of inflation. 

“While much debate is had over the level of inflationary pressure the global economy is facing, investors it would seem, are voting with their feet and adding to their crypto holdings to protect themselves and their assets,” he said.

Looking forward, Mr Peters admitted that it remains to be seen how far this price spike will extend.

“From an investor perspective, what’s key is understanding the intrinsic investment case for the crypto asset.”

“Anyone interested in the market should do their research thoroughly instead of just buying on the back of price movements,” he said.

Mr Peters' commentary comes on the back of similar predictions that inflationary pressures would open the floodgates for institutional investors considering holding cryptocurrencies like bitcoin. 

Earlier this month, deVere group CEO Nigel Green said that there was a growing consensus among the investor class that steps will be taken in response to growing inflation much faster than previously expected. 

“This climate will boost bitcoin and other cryptocurrencies as with their provable limited supply cap, they are an intrinsically deflationary asset class,” he predicted.

Experts say that this week’s triumphs for the crypto market are the result of investors looking to dodge rising inflation.

Neil Griffiths

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.