Bitcoin: A hedge for inflation and deflation
|Cryptocurrencies
Bitcoin, the king of cryptocurrency, is frequently cited as a substitute for gold as a safe haven product as a hedge against inflation. Let’s try to understand this stance and see if this is actually the case. If one reads any newspaper today, the most pressing issue presented is inflation and whether it is under control or not. This persistent increase in consumer prices is why investors and individuals, in general, are always on the lookout for hedges that will protect their wealth from decreasing in value and particularly their purchasing power to remain intact.
The need to shield one’s wealth from depreciation is amplified by the central bank’s printing of money, which it does in times of crisis to jump-start the economy and increase demand for goods and services. However, the printing of money dilutes the value of money. This dilution of money helps any asset that is valued in dollars, such as gold, Bitcoin, and commodities in general.
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