Pictet AM: "Demystifying Bitcoin"

Demystifying Bitcoin – Luca Paolini, chief strategist, Pictet Asset Management

It’s no coincidence that Bitcoin is back in the headlines just as concerns about inflation start to rumble.

That’s because cryptocurrencies, among which Bitcoin has the highest profile, have become barometers of sentiment about aggressive central bank monetary policy and financial repression. For the past decade, central banks have propped up their economies in the wake of the global financial crisis by driving interest rates and bond yields down below the rate of inflation, in effect forcing negative inflation-adjusted returns onto investors. That became even more pronounced as policymakers responded in even more emphatic fashion to the economic crisis caused by the Covid pandemic.

At the same time, distrust of government surveillance is growing as ever more of our lives move online. An anonymous digital currency becomes attractive.

But there’s a lot that can potentially go wrong for Bitcoin. So much so, that it would be hard to justify the digital currency as anything other than among the most speculative investments.

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