Bitcoin and Gold: Critical Hedges Against Currency Devaluation and Inflation, Says Jefferies
Jefferies asserts that Bitcoin and gold serve as "critical hedges" against the potential devaluation of currency and the resurgence of inflation. While investors may have relinquished their U.S. recession forecasts, macro signals continue to indicate an impending downturn in the United States. Jefferies highlights that this time, monetary tightening will operate with a larger-than-usual lag due to the significant growth in money supply since 2020.
The Persistence of Unconventional Monetary Policy
According to Christopher Wood, global head of equity strategy at Jefferies, G7 central banks, particularly the Federal Reserve, will face challenges in exiting from unconventional monetary policies smoothly. Wood emphasizes that these banks will likely remain committed to expanding their balance sheets in various forms. Failure to exit from unorthodox monetary policies in a benign manner may result in the collapse of the U.S. dollar's paper standard, benefiting both gold bullion owners and Bitcoin holders.
Bitcoin and Gold: Insurance, Not Short-Term Trades
Wood emphasizes that investments in Bitcoin and gold should be viewed as insurance rather than short-term trades. Bitcoin's narrative as an insurance policy against financial system instability gained momentum following the regional banking crisis in the U.S., where institutions like Signature Bank, Silicon Valley Bank, and First Republic Bank faced customer withdrawals due to lost confidence in their stability.
Jefferies recommends a 10% allocation to Bitcoin for long-term global investors, including pension funds. Over the past couple of years, Jefferies has added Bitcoin to its global portfolio, alongside physical gold, unhedged gold mining stocks, and Asia equities. The firm's decision was based on the belief that Bitcoin has become an investible asset for institutions, with established custodian arrangements for digital assets, and represents an alternative store of value to gold.
In 2021, Jefferies introduced a global long-only equity portfolio that includes a 3% allocation to the Grayscale Bitcoin Trust (GBTC).
Bitcoin and Gold: A New Business's Hedge Against Economic Uncertainty, According to Jefferies
Jefferies, a prominent global investment banking firm, suggests that Bitcoin and gold could serve as crucial hedges against potential currency devaluation and inflation. This assertion could have significant implications for new businesses, particularly in light of the current economic climate.
Challenges in Exiting Unconventional Monetary Policies
Christopher Wood, Jefferies' global head of equity strategy, points out that G7 central banks, notably the Federal Reserve, may struggle to smoothly transition away from unconventional monetary policies. If these institutions fail to exit these policies in a benign manner, the U.S. dollar's paper standard could collapse, benefiting both Bitcoin holders and gold bullion owners. This scenario presents a critical consideration for new businesses, particularly those with international operations.
Bitcoin and Gold as Long-Term Investments
Wood further emphasizes that investments in Bitcoin and gold should be viewed as insurance, not short-term trades. This perspective is particularly relevant for new businesses, as it underscores the importance of long-term financial planning and risk management.
Jefferies recommends a 10% allocation to Bitcoin for long-term global investors. This recommendation, along with the firm's inclusion of Bitcoin in its global portfolio, signals a growing recognition of Bitcoin as a viable investment for institutions. For new businesses, this development highlights the potential of Bitcoin as an alternative store of value.
Jefferies' Global Portfolio
In 2021, Jefferies introduced a global long-only equity portfolio that includes a 3% allocation to the Grayscale Bitcoin Trust (GBTC). This move further underscores the firm's belief in Bitcoin as a viable investment and hedge against economic uncertainty.
In essence, Jefferies' perspective on Bitcoin and gold offers valuable insights for new businesses. Amid potential economic downturns and monetary policy challenges, these assets could serve as crucial hedges, helping businesses navigate financial uncertainties.