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Bitcoin or Ethereum – Best Hedge Against Inflation?

A growing chorus of proponents of Bitcoin as a good hedge has emerged, including:

Jones, Paul Tudor the billionaire investor believes cryptocurrency is a better inflation hedge than gold, describing Bitcoin as a great way to protect wealth over the long run and a store of wealth like gold.

J.P. Morgan, the investment firm, told its clients that institutional investors appear to be returning to Bitcoin. They see it as a better inflation hedge than gold. The report cited assurances from US policymakers that the use or mining of cryptocurrency would not be prohibited, as China has. The Bank of America discovered that Bitcoin has not been compelling as an inflation hedge as commodities and even equities provide better correlations to inflation. The case for holding Bitcoin is not one of diversification or inflation protection but of pure price appreciation.

Ethereum

A group of professors from various Australian universities researched Ethereum as a hedge against inflation. The issuance rate of Ethereum. Since the beginning of August 2021, the growth of ETH supply has been declining without a complex supply cap. With a consistent rate of token creation, destruction has steadily increased to match the number of tokens created by September. Furthermore, the percentage of deflationary blocks is low during the first two weeks after the change. However, it quickly increases to nearly 50% of all blocks by the end of the sample period.

DeFi, a blockchain-based alternative financial infrastructure, has over $113.4 billion in funds locked in smart contracts. Non-fungible tokens (NFTs) are growing in popularity. Most of them use the Ethereum network. Hence, the network is likely to experience increased congestion.

Overall, Ethereum’s advantage over Bitcoin as an inflation hedge may be due to the cryptocurrency’s utility for other purposes rather than supply. Whatever side of the debate you take, one thing is sure: inflation in the United States and elsewhere boosts crypto investment activity. Gold was once the preferred method of hedging against inflation among investors. However, it is no longer serving the purpose it once did.

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