Whether it be gold, stocks, or dollars – all currencies are at the mercy of changes in the economy. In trying to combat this problem, many investors will hedge their risk by investing in Bitcoin.
Check websites like (official trading App) to know all insights of bitcoin trading and cryptocurrency trading. With its meteoric rise in value last year and a constant demand for it among investors, it is now considered an attractive alternative to traditional investments.
Bitcoin is now worth more than $10,000 and has seen a recent influx of new users seeking an alternative asset class as Bitcoin has become. These crypto coins are tough for governments and banks to control or manipulate because they are not based on any country’s currency or lenders like the Federal Reserve Bank system.
Since there is no central authority or government role, it is widely recognized as the modern solution to hedge against inflation. However, many people still wonder whether it is true or not. Here are some points to understand why Bitcoin works perfectly as a hedge against inflation to clear every doubt.
1. Bitcoin Is As Secure As Gold
Bitcoin is similar to gold and is considered a haven with a limited supply and won’t be affected by inflation. Therefore, people are buying Bitcoin as a hedge against future inflation. For example, if you had bought Bitcoin worth $1,000 and sold it when the price hits $8,000, it would have made an 8x profit.
The U.S dollar is widely used in almost every country globally, making it susceptible to inflation. Still, Bitcoin is different from other currencies in the market today and is considered an alternative hedge against inflation because of its security from counterfeiting and confiscation.
2. Limited Number OF Coins
Another selling point is that Bitcoin has a limited supply. There are only a fixed number of 21 million coins which means that the profit won’t go up in the long run. However, it will always stay stable and predictable after inflation.
As of now, almost 19,015,962.5 Bitcoins exist in the digital world. This number fluctuates about every ten minutes as new coins are mined in the market. The limited supply makes it an ideal choice to work perfectly as an inflation hedge.
3. High Demand
Considering its finite supply, it is no surprise that demand for Bitcoin has been multiplying in recent years, and this trend won’t stop anytime soon. This great demand can only indicate that many investors are willing to invest in Bitcoins without even knowing what it is or how it works.
Once they learn more about the asset class, they will continue to invest. This growing demand means that the asset’s value will rise in the coming years. It is a perfect hedge against inflation because it has the potential to grow its value over time.
4. No Third-Party Required
Bitcoin is not managed by any government and financial institution like banks or a central authority like other currencies in the market. Therefore, it makes it out of control, which means that it is not impacted by inflation.
Central banks can increase the money supply at will. Still, Bitcoin’s production (mining) is wholly decentralized through a network of voluntary miners where every miner is rewarded for maintaining their network. No one can control them, and nothing can create a new Bitcoin from nothing. As a result, Bitcoin has a tight money supply similar to precious metals like gold or silver.
5. Volatile Market But No Bubble
Bitcoin isn’t immune to market fluctuation because the natural economy works. However, many investors are bullish on it and still invest despite seeing its value fluctuate. If you’re keen on the market, it can be easy to make money.
Although the volatility of Bitcoin might sound negative, in reality, it is one of its most significant assets when it comes to hedging against inflation. It will continue to fluctuate in the short term, giving investors plenty of opportunities to profit. As an investor, you can choose to hold onto its value or make a profit as time goes on by selling it as the value rises.
Bitcoin might be the perfect hedge against inflation if you are willing to take risks and follow some protocols. If you are looking for an investment that will give you a high yield with low to no risk, Bitcoin is the right choice. However, it’s still relatively new in the market, and many people are still trying to understand it.