Why Is Bitcoin The Best Bet For Inflation Protection?

Bitcoin-Inflation has started to climb once more. India’s annual inflation rate has been rising in recent months, as has the case in many other countries. As a result, more people are seeking for ways to protect their assets from inflation, and cryptocurrencies such as BTC appear to be a good option.

Money printing by the central bank, it is said, would lead to inflation or devaluation of money over time. BTC, on the other hand, has a hard limit of 21 million coins that can ever be created. BTC is resistant to inflation due to its restricted supply. Let’s look at it more closely.

Inflation

Inflation is simply the growing cost of goods and services. Increasing prices, in other words, lower people’s purchasing power. As a result, previously lower-cost goods and services now require more fiat cash to be purchased. Two years ago, a $10 chocolate bar would have cost $20. Inflation is to blame. A number of macroeconomic and microeconomic factors can contribute to inflation.

Persistent inflation, according to most observers, occurs when the amount of fiat money in circulation increases in a way that is unrelated to the country’s economic success.

Most countries have a national central bank to keep inflation under control. It creates credit ceilings and manages the supply of fiat money in circulation for the benefit of the national economy. These remedies, however, have repeatedly failed, necessitating the construction of an inflation hedge. In an ideal world, an inflation hedge would appreciate in value when the value of fiat currency declines.

Inflation-protecting assets such as gold and real estate have long been favored. These assets frequently kept or even rose in value during periods of inflation. Investing in these types of assets might help safeguard your money from depreciation due to inflation.

Investors’ interest in gold, on the other hand, has been continuously dropping. It’s still an excellent long-term investment, but the returns aren’t quite as good as they once were. Furthermore, it is inconvenient to move and store. This is where BTC enters the picture.

What Is Bitcoin’s Approach to Inflation?

For the following three reasons, Bitcoin is a better inflation hedge than gold or other traditional assets.

Bitcoin is unattached to any currency or economic system

Bitcoin, unlike gold, is not bound to a currency or economic system. It is not under the jurisdiction of corporations or stakeholders. It’s a worldwide asset class that reflects worldwide demand. To compensate for dropping asset prices, rising inflation forces investors to take on more risk. For example, a 3% dividend yield could be used to supplement retirement income.

However, if the inflation rate is 6%, that is insufficient. Long-term S&P 500 returns are between 7% and 8% per year, slightly higher than the current inflation rate. Because BTC avoids many of the political and economic dangers that equities do, it may be a superior investment than equities. BTC and other cryptocurrencies can help you diversify your income sources away from domestic sources.

Bitcoin’s supply is finite

Bitcoins (BTC) are limited to 21 million by an algorithm. In 2022, there will be 19 million BTC available. Within the first 12 years of BTC’s existence, 90% of the cryptocurrency’s mineable supply had been distributed. BTC circulation limitations ensure that there is no excess supply, which helps to keep inflation under control. In addition, every four years, the mining return is halved. BTC’s annual production rate is around half that of gold, and it is expected to decline, making it more valuable and difficult to acquire.

Bitcoin makes it simple to keep your money’s worth

Bitcoin, like gold, is long-lasting, interchangeable, secure, and limited. Unlike gold, bitcoin may be moved, transferred, and is decentralized. Sovereign nations, such as the United States, China, Germany, and others, hold the majority of the world’s gold. Bitcoin is easier to store and protect than gold. Those who consider gold to be a valuable commodity may argue that the two are interchangeable.

The blockchain technology that underpins Bitcoin, on the other hand, has real-world applications. In industrialized countries with outdated fiat currencies, Bitcoin has limited practical utility as a currency. Bitcoin, on the other hand, is a preferable medium of exchange in economies prone to hyperinflation and political unrest.

Final Thoughts

Investing in Bitcoin as an inflation hedge is a wise decision, but regulatory developments should be properly monitored. The foregoing factors reinforce that investing in Bitcoin is a better option than gold, real estate, or other traditional assets. Bitcoin has a unique position as an inflation-resistant asset due to its restricted supply and decentralization.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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