Bitcoin as a Hedge Against Inflation: What It Means for Institutional Investors
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Bitcoin as a Hedge Against Inflation: What It Means for Institutional Investors
Aug 16, 2024 | Cryptocurrency
Explore how Bitcoin can act as a hedge against inflation and why institutional investors are adding it to their portfolios. Learn about the benefits and risks.
Experts suggest that bitcoin is an effective hedge against excessive government spending and recommend that institutions adopt a bitcoin asset allocation of about 5% of their assets. BlackRock CEO Larry Fink, previously a ?proud skeptic? when it came to bitcoin, changed his mind after studying it more and is now a ?major believer? in bitcoin investing. This endorsement from a leading financial authority highlights the growing acceptance of bitcoin as a valuable component of a diversified investment portfolio.
What It Means for Institutional Investors
The United States has spent an eye-popping $5.02 trillion through the first three quarters of fiscal year 2024. Though the federal government insists spending at such a rapid pace is necessary to ?ensure the well-being? of the nation?s citizens, critical thinkers are justified in questioning the spending spree. Government spending fueled by arguably negligent money-printing has been on the rise across recent decades, with an especially large spike during the COVID-19 pandemic.
Churning out dollar after dollar gradually weakens the value of the nation?s domestic currency. Simply put, excessive government spending causes inflation. Inflation devalues savings and the value of money stored in traditional investment vehicles such as stocks, ETFs, and mutual funds. Institutional investors are encouraged to hedge against growing inflation using bitcoin.
Larry Fink?s Perspective on Bitcoin
The CEO of BlackRock, Larry Fink, is pounding the table in favor of bitcoin. Fink, one of the most respected minds in the financial world, advises institutional investors to hold 5% of their assets in bitcoin. The bitcoin endorsement from one of the financial industry?s leading figures raised some eyebrows for good reason: bitcoin has often been stereotyped as a high-tech passing fad
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