Bitcoin has a reference to a hedge against inflation. The reason is that this virtual currency has a limited supply, while fiat money has an unlimited supply. The central bank can print more fiat money and release it to the public hence decreasing in value. On the other hand, gold has had regards as a go-to inflation hedge. However, this virtual currency emerged and has inflation-resistant characteristics. Also, you will need to find a reliable trading platform to enable the buying, selling, and trading of this electronic money. This virtual currency is the largest and most established cryptocurrency, making it an excellent inflation hedge than gold.
Inflation’s Impact on Currency
Inflation reduces a currency’s purchasing power; hence it is not necessarily bad. Most finance experts believe that moderate inflation can be beneficial. On the other hand, investors prefer using this electronic asset to hold a part of their savings. This virtual currency has a higher return potential despite being notoriously volatile. However, a moderate inflation rate encourages spending. Below are reasons why the public should choose this virtual asset as a hedge against inflation over gold.
This virtual currency is safe, private, and easy to transfer, like gold. This virtual money has an added advantage over gold since it is more portable. Gold has a physical appearance, while this electronic asset is entirely online. To move this virtual currency, you only need to own a Smartphone, have access to some network, and have primary education.
Because of the decentralized nature of this digital asset, anyone can store Bitcoin, compared to gold which has a controlled supply. However, there are tons of exchanges online, and all claim to be genuine. However, there are those brokerages that are a scam. Therefore, read about the brokerage you choose before trading. This ease of transferring this virtual money makes it a great choice when hedging against inflation. Also, an excellent trading platform can help you with Bitcoin; an example is Bitcoin-Code.
This virtual asset has a fixed supply, meaning investors can only mine 21 million Bitcoins. This limited supply plays a significant role in why this electronic asset is a hedge against inflation. Besides the supply limitations, this form of currency undergoes a halving process. This halving process occurs after four years when investors mine 210,000 Bitcoins. Due to the halving process, these electronic money rewards reduce into two, resulting in a limited supply of this virtual asset.
This Bitcoin scarcity leads to an increase in this digital money demand which translates to a rise in value. Moreover, this limited supply means new coins cannot enter circulation, eliminating inflation risk. Also, this electronic money has a long-term growth potential making it an excellent inflation hedge.
Lack of Ties to a Specific Economy of Currency
This virtual currency is not under an owner, a country, or real-life money. In other words, this electronic money is decentralized, which allows it to be independent of regulations. This digital currency is an international asset class that reflects worldwide demand. Moreover, this virtual money is an excellent alternative as it does not have risks tied to factors such as the stock market. Because of the absence of ties to a specific economy or currency, this digital asset is an excellent hedge against inflation than gold.
The Bottom Line
Bitcoin benefits its users significantly by enabling fast, secure, less costly,y and transparent transactions. However, people prefer this virtual currency because it is more inflation-resistant than gold. Ultimately, this virtual asset offers its users benefits that outweigh gold.