ChatGPT uncovers whether Bitcoin or Gold is the ultimate safeguard against inflation
In the midst of uncertain global economic conditions, investors are turning to Bitcoin and gold as assets that can provide refuge from inflation. Traditionally, gold has been the preferred option for hedging against inflation, but Bitcoin is gaining popularity due to its limited supply and potential for significant gains. However, both assets come with their own risks and rewards, leading to ongoing debates about which one truly serves as the ultimate inflation hedge.
To shed light on this debate, Finbold sought insights from ChatGPT-4o, an AI model, to determine which asset offers the strongest inflation-hedging potential in today’s complex economic landscape.
As of 2024, Bitcoin has experienced a 60% year-to-date increase, reaching a current price of $67,683. On the other hand, gold has surged to near-record highs at $2,758.45 per ounce, achieving a 33% gain year-to-date.
Despite these impressive gains, geopolitical tensions and socioeconomic factors have introduced complexities that affect the role of each asset as a store of value.
The Bitcoin-to-gold ratio, which compares the value of Bitcoin to the price of gold per ounce, reveals that Bitcoin’s outperformance of gold has declined since March 2024. Data from Bloomberg Intelligence shows a downward trend, with Bitcoin now equating to 24 ounces of gold.
This shift highlights gold’s steady appeal in the face of global economic pressures. Analysts from Bank of America recommend gold as the “last safe haven” due to concerns about rising U.S. debt and Treasury supply.
Although the U.S. dollar index has recently climbed to 104.24 and the 10-year Treasury yield reached 4.24%, factors that typically reduce interest in non-yielding assets like gold, demand for gold remains strong amid market uncertainty.
Central banks have also increased their gold holdings, with gold now making up 10% of global reserves compared to 3% a decade ago.
On the other hand, Bitcoin’s status as an inflation hedge is influenced by geopolitical tensions and uncertainties in the traditional financial system, rather than direct inflationary trends.
Bitcoin has seen increased demand from institutional investors and rising open interest in Bitcoin derivatives. However, its performance is highly sensitive to geopolitical events. As tensions rise in the Middle East, analysts predict that Bitcoin may struggle to retain its value, potentially dropping below $60,000.
Bitcoin is also seen as a hedge against concerns about bank instability and de-dollarization, rather than direct geopolitical hedging.
With the U.S. presidential election approaching, many believe that a Trump victory could boost Bitcoin due to his favorable stance on cryptocurrencies. However, volatility is expected in the meantime.
According to the analysis by ChatGPT, gold’s resilience and established safe-haven status make it a strong inflation hedge in the face of fiscal uncertainty and geopolitical unrest. Meanwhile, Bitcoin, with its limited supply and potential for high growth, appeals to risk-tolerant investors who are willing to embrace volatility.
In conclusion, while Bitcoin appeals to digital-age investors with its growth potential and speculative nature, gold’s consistent track record in turbulent markets solidifies its position as the ultimate inflation hedge in 2024.