How does bitcoin combat inflation

Many avid cryptocurrency technologists believe that everyone should hold a portion of their asset allocation in crypto, in particular, bitcoin to combat the risk of inflation through the ever-increasing money supply. There is a narrative that inflation will continue at unprecedented rates as central banks flood the money markets with “stimulus” in an attempt to oppose the effects of the covid downturn. However, the vast volumes of capital injection to the economy has the painful result of diminishing purchasing power for citizens. In essence “A dollar today is not worth what it was yesterday” as asset inflation rapidly rises around the world and consumer goods are on an above average increase. With wage rises stalling, people are becoming more and more leveraged with mortgage and credit card debt at never seen before levels. Will the leverage bubble burst or will the can keep getting kicked down the road for someone else to deal with? No government wants to be responsible for a 2008 like global financial crisis. The 2008 GFC wasn’t the fault of the political party that was in charge at the time, rather predecessors from several terms prior that cumulated in a catastrophic financial Armageddon. No current sitting political party wants to be perceived as presiding at the time of such an event and instead chooses to “stimulate” the economy with money supply. The fact that they have the power to print money when they chose should be concerning for all. In a time where it has never been more obvious that the inflation rates are getting out of hand, it is the reason that many are turning to a deflationary hedge option in bitcoin. With a guaranteed hard cap supply of twenty-one million, that is no one person or entity can print or produce more, it is of a fundamental deflationary nature. Ones purchasing power increases over time, the exact opposite of what occurs with fiat currencies around the world.       
A typical portfolio that hedges against inflation will divide capital across blue chip equities, commodities, and gold. The new addition to this is a bitcoin allocation, particularly with golds investment returns stagnating. Bitcoin is now referred to as digital gold and is on a trajectory to overtake the global market cap for gold, potentially within the next decade if similar trends continue in the growth of bitcoins adoption. Australia is in the early stages of individuals turning to bitcoin superannuation with a long-term investment horizon for their super. If the monetary supply continues at its current rate, then inflation levels will hit unprecedented heights. It will be at this point that it becomes very clear to people that an asset allocation in bitcoin is an absolute necessity.     

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: