Despite the recent collapse of the cryptocurrency industry, one major European asset manager, Amundi, believes that digital assets like Bitcoin still have potential. In a recent thematic paper analyzing the state and prospects of the crypto market, Amundi’s chief investment officer Mortier Vincent and macroeconomist Perrier Tristan argued that while Bitcoin has failed to serve as an inflation hedge over the past two years, its limited supply may attract more attention if inflation continues to remain above central bank targets.
Bitcoin’s recent inability to protect investors against rising inflation in 2021 and 2022 has been a cause for concern. However, Vincent and Tristan believe that Bitcoin’s long-term prospects remain positive, particularly due to its limited supply. Unlike traditional currencies, Bitcoin has a finite supply of 21 million coins, which makes it more resistant to inflation. This means that as central banks continue to print money to stimulate economies, Bitcoin’s limited supply may become more attractive to investors seeking a hedge against inflation.
Despite the recent collapse of the cryptocurrency industry, with Bitcoin losing nearly half of its value from its all-time high in late 2021, Vincent and Tristan remain optimistic about the digital asset’s future. They acknowledge that dramatic rises in policy and market interest rates have pressured all asset classes, including Bitcoin. However, they argue that the recent market downturn is not a sign that Bitcoin is doomed to fail. Instead, it may be an opportunity for investors to buy into the digital asset at a lower price.
Overall, while the recent collapse of the cryptocurrency industry may be cause for concern, Vincent and Tristan believe that Bitcoin’s limited supply and potential as an inflation hedge make it a valuable asset for investors. As central banks continue to print money and inflation remains a concern, Bitcoin’s long-term prospects may be brighter than they appear.