Prices are going up everywhere you look, including for groceries, housing, gas, and other things. Households may start wondering how they can safeguard their hard-earned cash against inflation after the Consumer Price Index rose by a record-breaking 6.2 percent in October. Recent remarks from the Federal Reserve emphasize that “risk of greater inflation has increased,” therefore it’s not surprising that investors are seeking out new opportunities. At the time of writing, Bitcoin has increased in value by over 700 percent since the year began and has proven to be a reliable hedge against the federal government’s money production.
Let’s examine some of Bitcoin’s advantages and why it might be the answer to inflation worries:
1. No longer will your dollar be devalued by money printing thanks to Bitcoin’s fixed supply
There can never be inflation to the 21 million defined quantity of Bitcoin. In order to ensure that everyone who owns Bitcoin is aware of their overall ownership of the currency, it is crucial to have a steady supply cap. If you are concerned that you won’t be able to buy a complete Bitcoin, you shouldn’t be because the cryptocurrency is divided by 1 million and buying fractional amounts of it is simple. In the past, the federal government has provided bailouts and expanded the supply of dollars during times of need, significantly increasing the total amount of money in circulation. This decreases the purchasing power of each dollar and is a major contributor to our inflation. However, since the quantity is limited and will prevent those who possess Bitcoin from gradually losing ownership of the protocol over time, it cannot suffer from more money creation.
2. Bitcoin technology and development are still expanding
The Apple App Store’s early iterations were vastly inferior to those of today. Simply put, the answer is because of how much effort and money developers invested in creating applications for a certain platform. As a result, millions of user programs may now be found in the Apple App Store, which is currently quite popular. Bitcoin is moving in a similar direction, with more advancements being made daily and more users interacting with the platform. The growth of Bitcoin is continuing, and there have been significant breakthroughs like Twitter enabling Bitcoin tipping for content creators. Although commodities like gold can also be used as an inflation hedge, Bitcoin has a clear path to rise because to the numerous technological applications that are possible.
3. Institutional asset class growth
A number of milestones were achieved by bitcoin in 2021, including the asset class’s first $1 trillion valuation. The demand for Bitcoin will keep rising as organizations, pension funds, endowments, and corporate balance sheets start to take this asset class into account for an allocation. We would observe huge rises in Bitcoin demand if businesses decided to convert a portion of their gold holdings into Bitcoin as an inflation hedge. Naturally, the price of bitcoin will rise when the fixed supply and growing demand are combined. Governments have also been known to buy Bitcoin using their treasuries, such as El Salvador, which only contributes to the rising demand we anticipate in the upcoming years.
Despite the fantastic tailwinds this asset provides, it’s crucial to remember that it has extremely high volatility and could decline significantly. Even if the price of Bitcoin has experienced numerous drops, it is crucial to note that, if kept for at least four years, no investor since the invention of Bitcoin has ever lost money.
