Since the beginning of 2024, there has been a significant outflow of private investors from fiat currencies to Bitcoin. Matt Hougan, Chief Investment Officer of Bitwise Asset Management, believes that there is growing distrust in the stability of the traditional fiat financial system, with Bitcoin and gold becoming the primary alternatives for capital preservation.
This is reported by Business • Media
Growing Distrust in Fiat Money
According to Matt Hougan, most people take fiat for granted, unaware of its limitations – it resembles “water for fish,” which goes unnoticed. The abandonment of the gold standard in 1971 marked a turning point, after which the risks associated with government currencies and their trust increased. This is why more and more investors are leaning towards alternative assets, with Bitcoin and precious metals leading the way.
“Central banks are accelerating their gold purchases, especially after 2008 and Russia’s invasion of Ukraine, which Hougan links to fears of currency devaluation and reserve confiscation. This precious metal has already become the second-largest reserve asset, surpassing the euro, the expert noted.”
Bitcoin Outpaces Gold in Investment Inflows
Institutional and private investors are increasingly viewing Bitcoin as a digital equivalent of gold, allowing them to protect assets from monetary risks. Since the beginning of the current year, Bitcoin ETFs have attracted $45 billion, while gold ETFs have added only $34 billion. At the same time, the market size of the first cryptocurrency does not yet allow central banks to actively invest in it, but the upward trend is clear. According to Hougan, trust in fiat currencies is diminishing, prompting private investors to seek alternatives.
The expert notes that traditional portfolio strategies focused on stocks and bonds are entirely dependent on fiat currencies. In contrast, gold and Bitcoin provide “rare independence” and protection against global risks. The shift towards limited forms of money, according to Hougan, is a response to increasing risks and the loss of trust in classic financial instruments.
Additionally, many modern investors are beginning to rethink the essence of fiat money and its resilience, asking themselves: “What is fiat and why do we consider it reliable?” Against this backdrop, Bitcoin is increasingly seen as a tool for preserving value in unstable times.
Recall that previously, Michael Saylor, former head of Strategy (formerly MicroStrategy), stated that the era of the so-called crypto winter is already over and Bitcoin will not return to previous lows.