Jefferies calls Bitcoin a safeguard against currency inflation

Global investment bank Jefferies asserts Bitcoin (BTC) as a safeguard against currency devaluation and rising inflation.

The price of Bitcoin hovers at around the $27,961 region as of press time.  

Jefferies, a prominent global investment bank, advises long-term investors, particularly pension funds, to allocate 10% of their portfolios to Bitcoin, denominated in U.S. dollars. 

The bank underscores the importance of considering investments in Bitcoin and gold as insurance measures rather than short-term trades.

They highlighted that attempts to tighten monetary conditions will face extended delays in this economic cycle, attributing it to the substantial increase in the money supply since 2020.

Christopher Wood, Jefferies’ Global Head of Equity Strategy, expresses concerns about the ability of G7 central banks, including the Federal Reserve, to transition away from unconventional monetary policies smoothly. 

He suggests that these central banks will likely maintain their commitment to expanding their balance sheets in various ways, highlighting the need for strategic investment decisions in the face of evolving economic landscapes.

Jefferies emphasized Bitcoin’s role as an inflation hedge, noting that investors have largely overlooked fears of a U.S. recession. Despite this, ongoing economic indicators persistently indicate an imminent economic downturn.

Bitcoin’s narrative as a safeguard against financial system instability further gained traction earlier this year following the U.S. banking crisis

Several institutions, including Signature Bank, Silicon Valley Bank, and First Republic Bank, experienced significant challenges earlier this year as customers, lacking confidence in their stability, withdrew their funds in a state of panic.

Grayscale victory sparks hope for Bitcoin ETFs

The Securities and Exchange Commission (SEC) is yet to greenlight a spot Bitcoin Exchange Traded Fund (ETF), an investment vehicle that enables investors to engage with Bitcoin without owning the actual cryptocurrency. 

A recent court ruling in favor of Grayscale Investments, managing the world’s largest crypto fund, has set the stage for potential Bitcoin ETFs.

This ruling mandates the SEC to scrutinize Grayscale’s application, although the agency retains the option to challenge the court’s decision. A spot Bitcoin ETF, if approved, would be traded on conventional stock exchanges, with Bitcoin custody managed by a brokerage.

The SEC has consistently rejected spot Bitcoin ETF applications, citing concerns that applicants haven’t demonstrated adequate investor protection against market manipulation. 

Nevertheless, cryptocurrency enthusiasts anticipate that approving a spot Bitcoin ETF could pave the way for broader institutional adoption. Such an ETF would simplify asset accessibility, enabling investors to buy and sell digital currency through brokerage accounts more easily.

Market Vector Indexes CEO Steven Schoenfeld recently expressed optimism about the SEC approving multiple Bitcoin ETF applications simultaneously.

He stated that these approvals might occur sooner than he initially anticipated. 

On Sept. 26, the House Financial Services Committee members wrote a letter to SEC Chair Gary Gensler, urging the SEC to proceed with the approval of ETF applications. They, however, mentioned that they plan to address the matter during an upcoming hearing with him.

Cathie Wood, the CEO of influential innovation investor ARK Invest, has also expressed newfound optimism about the potential approval of a Bitcoin spot ETF in the U.S.

Wood stated that the odds are going up for such a decision. Wood’s remarks coincide with continuous efforts by various entities, including established firms like Fidelity and BlackRock, to launch a Bitcoin ETF in the U.S. 

This trend reflects a growing interest in offering investors simpler access to cryptocurrency.