A crucial trend in the gold market has just been disrupted, and cryptocurrencies might be to blame.

Historically, gold has been hailed as a long-term hedge against inflation, providing investors with the benefits of portfolio diversification and the security of knowing that its price will (most probably) rise over time. But are times changing?

With the annual inflation rate in the US reaching a new 13-year high of 5.4% in September 2021, gold’s long-established title as an inflation hedge is being put to the test. The biggest gold ETF has been hit with more than $10bn in outflows this year, according to Bloomberg data, with the price of gold down 6.1% since January 2021. Bitcoin on the other hand has doubled in price reaching a new all-time high of >$67,000 this past week. Many investors are now turning their heads towards Bitcoin and other cryptocurrencies in the current climate of high inflation and zero-bound interest rates.

The launch of ProShares Bitcoin Strategy ETF (BITO), which topped $1.1b AUM in two days, the fastest any ETF has hit the $1bn mark, just shows the level of investor enthusiasm surrounding cryptocurrencies.

This commercial adoption of Bitcoin and other cryptocurrencies continues to drive the mainstream acceptance of crypto as an investable asset but will it steal gold’s decades-long track record as the most popular inflation hedge amongst investors.

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