Inflation is nearing levels that haven’t been seen in years. How does Bitcoin stand up against other assets as a tool to beat inflation?
How does a rise in inflation impact Bitcoin prices?How effective is Bitcoin as a hedge against inflation? Let us first understand what inflation is and how useful the other stuff is to deflate it.
With inflation in fiat-based economies a given, experts and even regular people have been looking for an investment or a tool that works as a hedge. Gold, stocks and real estate have long brought respite to investors who are ever afraid of losing value to inflation. It will be apt to say that these commodities always have had their limitations as a hedge.
As of late, however, bullions, or commodities like gold and silver, have come across to be less reliable over small investment horizons. In 2021, bullion steadily lost ground. Real estate has low liquidity and higher transaction costs and requires continual management and maintenance. Regarding stocks, they require investors to have sophisticated financial skills and the majority of regular people lack the skill set for being an efficient stock manager.
The Consumer Price Index is a popular metric used to measure inflation, exploring the weighted average of various price baskets of goods and services. The CPI metric affects interest rates, wages, state benefits, tax allowances, pensions, maintenance, contracts and other payments.Putting money in store of value investments like gold, real estate, stocks and crypto helps curb inflation.
As cash loses purchasing power over time, keeping cash leads to people losing their savings. This has prompted people to put their money in store of value investments such as gold, real estate, stocks and, now, crypto.To be held as a store for value, an asset should be able to hold its purchasing power over time. In other words, it should increase in value or at least remain stable. Key properties associated with such assets areDuring past inflationary periods, gold has had a mixed track record.
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