Investors Betting on Inflation Could Do Worse Than BTC

Gold has seen massive inflows, both for the precious metal itself and gold ETFs, at a time which coincided with sharp corrections in BTC, leading some to suggest that investors are looking to beef up their inflation hedges with something perhaps a little less volatile.

But in case one should mistake correlation for causation, SkyBridge Capital, a US$7.5 billion hedge fund, says that investors seeking currency alternatives as global debt balloons, should look to BTC and not just bullion.

As gold pushes northwards, Troy Gayeski, co-CIO and senior portfolio manager at SkyBridge Capital has said that both gold and BTC are likely to rally, even as some investors see the two asset classes as mutually exclusive and recent flows perceived as cannibalizing demand between themselves.

Speaking with Bloomberg via a phone interview last week, Gayeski said,

“We’re going to stick to BTC and crypto because we just think there’s more upside.”

While acknowledging far more volatility in the process, Gayeski also noted that “you’re going to capture a little bit more juice than you will in gold from that same phenomenon (inflation).”

SkyBridge Capital’s fledgling BTC fund is up 51.2% since its inception last December through June.

Investors are continuing to track commentary by Fed officials as inflation data suggests that prices are rising fast and assessing when policymakers will start to pare back the huge asset purchases that propped up the U.S. economy during the depths of the pandemic.

Last week, the Fed announced that it would be exiting positions it had taken up in the bond ETF markets, but given the relatively small size of those holdings, hardly measured a blip in overall bond markets.

But the massive monetary support through US$120 billion-a-month asset purchases by the Fed has driven the central bank’s balance sheet to record levels while a fiscal spending avalanche, which only looks set to balloon in the wake of the Biden administration poses an eventual risk to the dollar’s value, burnishing the appeal of alternatives.

While BTC volatility often makes headlines, bullion is no slouch either when it comes to turbulence, with both assets seeing substantial swings this year in what appears to be a battle for alleged inflation-protecting dominance.

BTC came close to US$65,000 in April before plummeting to around US$36,000 where it currently trades while gold came close to entering a bear market in March before staging a dramatic turnaround the erased an entire year’s worth of losses.