Bitcoin Continues to Rack up Gains as Investors Eye Inflation Hedge

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By Yasin Ebrahim – jumped above $40,000 Monday as the Musk-fueled rally was helped by the backing from some investors who continue to favor bitcoin as a hedge against rapid inflation on worries the Federal Reserve could be too slow to act.

rose 7.47% to $40,146.

“I like Bitcoin as a portfolio diversifier,” Paul Tudor Jones of Tudor Investment Corp. said in an interview with CNBC. “The only thing I know for certain, I want 5% in gold, 5% in Bitcoin, 5% in cash, 5% in commodities.”

Last week, data showed that U.S. inflation hit its highest rate since 2008. But the Fed continues to suggest the risk of inflation getting out of control is low as the factors boosted prices are temporary.

The Federal Reserve’s delivers its monetary policy decision and updated outlook on several data points including inflation, economic growth and the labor market on Wednesday.

If the Fed indicates shrugs off inflation and continues to suggest that it will maintain the status quo on policy, then Jones suggests it could be time to invest heavily in inflation trades.

“If they say, ‘We’re on [the] path, things are good,’ then I would just go all in on the inflation trades,” Jones said. “I’d probably buy commodities, buy crypto, buy gold.”

The call for bitcoin as an inflation hedge comes just a day after Tesla CEO Elon Musk reversed his stance on bitcoin, saying that the company (NASDAQ:) could accept bitcoin transactions again in the future.

“When there’s confirmation of reasonable (~50 percent) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions,” he said in a tweet on Sunday.

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Musk has appeared as both hero and villain in bitcoin’s volatile run of 2021 so far. His announcement in February that Tesla had bought $1.5 billion worth of BTC to hold in treasury helped propel the popular crypto toward all-time highs of around $65,000 in April.

BTC topped out soon after, however, as Musk revealed Tesla had sold 10% worth of bitcoin, and then the CEO began to grow increasingly concerned with the energy usage that miners use to mint bitcoin.

The move lower was also exacerbated by a regulatory crackdown in China on crypto trading and mining activity.

Despite the latest move higher in bitcoin, overall sentiment on BTC remains finely poised as investors appear to be in wait-and-see mode, with little movement on crypto exchanges.

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