Do cryptocurrency consider a hedge against inflation?

Crypto tokens may provide a hedge against inflation, but this is not guaranteed. Inflationary pressure could reduce the purchasing power of crypto tokens, making them less effective as a hedge.

But, what about the father of crypto? BITCOIN

The fact is; that Bitcoin remains an attractive asset due to its scarcity, its decentralized nature, and its ability to be used as a store of value. While its price is volatile, it has the potential to increase in value over time, also bitcoin is still an attractive asset because it is still an early adopting technical asset.

In order to understand this; we need to talk about:?

1. Fiat currencies.
2. Commodities.
3. Real state.
4. Cryptocurrency.

Fiat currency is not an asset, not physical, not digital; fiat currency is backed by the full faith and credit of the issuer, typically a government.

Commodities, like Gold, GOLD is a physical asset that has been used as a store of value for centuries.

Real estate, we all know how real estate works.

And finally, the king of cryptocurrencies; BITCOIN, bitcoin is a decentralized digital asset that can be used as a medium of exchange; bitcoin is often referred to as a digital or virtual currency.

But, why is bitcoin cryptocurrency often compared to gold?

As we said; Gold is a physical asset that has been used as a store of value for centuries; While bitcoin is a digital asset that was created in 2009; Also gold is a more liquid asset than Bitcoin, as it can be traded on exchanges around the world.

Regardless of that statements; bitcoin is often compared to gold, as it is a store of value and a hedge against inflation.

Bitcoin is often seen as a hedge against inflation because it is a decentralized asset that is not subject to government or central bank control. Additionally, the limited supply of Bitcoin means that it is unlikely to be affected by inflation in the same way that fiat currencies are.

To understand why or what provoque inflation; Let’s take a look at the common factors that affect Fiat currency inflation.?

1. The increase in the money supply: It is one of the most important causes of inflation. When the money supply increases, the value of each dollar decreases. So, more money is needed to buy the same item.?
2. The decrease in the value of the US dollar: When the value of the dollar decreases, it takes more dollars to buy the same item. This is because when the dollar is worth less, each dollar can buy less than it could before.?
3. The increase in government spending: When the government spends more money than it takes in, it has to print more money to cover the difference. This increases the money supply and causes inflation.?
4. The decrease in the supply of goods and services: If the supply of goods and services decreases, it takes more money to buy the same item. This is because there are fewer goods and services available for people to buy.?
5. The increase in taxes: When taxes go up, people have less money to spend. This decreases the amount of money in circulation and causes inflation.

To say that an asset is a hedge against inflation is because none of the above will ever directly affect its value; In other words; An asset is a hedge against inflation if it maintains or increases its value over time and protects against price fluctuations; some examples are:?

1. Real estate.
2. Precious metals. (Gold)
3. Oil.

Three assets that are often used as a hedge against inflation.

Hard assets are considered to be a good hedge against inflation and have the following properties:?

1. Scarcity.?
2. Accessibility.?
3. Durability.?
4. Lack of Substitutes.?
5. Inflation Hedge.

So the question is; Is Bitcoin cryptocurrency a hedge against inflation??

Bitcoin may be a hedge against inflation because it is not subject to government control or manipulation. Bitcoin is also scarce, which means that its supply is limited and its value may increase over time; Bitcoin is often thought of as a hedge against inflation because it is not affected by the same factors that affect traditional fiat currencies. For example, Bitcoin is not subject to monetary policy, which means it is not susceptible to inflationary pressures.

Then we may ask; Was bitcoin cryptocurrency created copying gold? No, bitcoin was not created copying gold; while both assets are scarce and have been used as a store of value, they have different characteristics, as we have already explained.

By the way; There are an estimated $300 trillion in assets worldwide, with fiat currency accounting for $200 trillion, cryptocurrency $2 trillion, commodities $50 trillion, and real estate $50 trillion. Fiat is considered in this estimated because it is a globally recognized currency, also considered because it is a stable currency.

But again, #EverGrow provides the information and shares it with you, but the most important is what are your thoughts. What do you believe?

And remember; this is not financial advice.