Bitcoin: Is it Ready to Become an Inflation Hedge?

The Wallet Bandwidth Dilemma

Skybridge Capital’s CEO, Anthony Scaramucci, dropped a bombshell on the latest episode of CNBC’s Squawk Box, proclaiming that while Bitcoin (BTC) is a tantalizing asset, it just isn’t quite ready to step into the ring as an inflation hedge. He argues that it requires a substantial increase in the number of wallets participating in the Bitcoin economy—specifically, Scaramucci believes we need around a billion wallets to actually get there.

Currently estimated at about 200 million wallets, Bitcoin has a long way to go. “Until you hit that billion, billion-plus mark, Bitcoin is still seen as an early adopting technical asset,” he noted. Sounds like Bitcoin needs to step up its game and invite some friends to the party.

From Hedge to Headache?

Initially, Bitcoin was hailed as an inflation hedge, thanks to its capped supply of 21 million coins. However, as Scaramucci pointed out, Bitcoin has clawed its way into closer correlation with stock markets than some of its enthusiastic fans had hoped. In a world where inflation continues to rise, it seems Bitcoin has become more of a rollercoaster ride than a safety net.

Institutional Love for Bitcoin

Despite his reservations, Scaramucci remains bullish on Bitcoin and cryptocurrency at large. He highlighted recent moves from institutional giants like BlackRock, launching a private spot Bitcoin trust. What does this mean? It indicates that institutional demand for Bitcoin is still sizzling beneath the surface, potentially ready to boil over.

The Current Market Landscape

The market isn’t all rainbows and sunshine, though. Scaramucci pointed out there’s a heavy volume of short selling going on, suggesting that some traders might find themselves in a precarious position. “People could get their faces ripped off when they least expect it,” he warned, an image that’s both vivid and a bit disturbing if you think about it too much.

Different Views on Bitcoin as an Inflation Hedge

Despite Scaramucci’s views, not every expert is ready to throw in the towel. Steven Lubka from Swan Bitcoin argues that while Bitcoin has struggled as a hedge during this year’s inflationary events, the root cause was largely due to supply shocks rather than a run-of-the-mill monetary expansion. So, maybe there’s hope for old BTC yet? Fascinating debates abound in the crypto community.

Meanwhile, across the Squawk Box, Coinshares’ Meltem Demirors chimed in, noting that Bitcoin prices are likely to remain flat this quarter. With no new capital rushing in, and a complicated relationship with tech stocks, it seems Bitcoin is in for a bit of a dusty road ahead.