Can Bitcoin and cryptocurrencies outpace inflation?
Well, to answer the question, we need to look at the main feature an asset needs to have to beat inflation. In this case, an asset needs to maintain or grow its value over a period of time. Its price needs to grow in a way that keeps up with inflation as to have the same value a year from now, or better yet, have a greater value.
We need to see that property in any cryptocurrency in order to judge if it’s a good hedge against inflation. First, let us discuss Bitcoin, as it is the most valuable cryptocurrency out there and the one with the greatest potential to beat inflation
If we were to look at the performance of Bitcoin over the period of one year, it would be easy to say that it beats inflation. A year ago, BTC was at around nine thousand dollars and growing. Today it is at forty thousand dollars. Then we can say Bitcoin beats inflations and case closed.
Well, it is not that simple as any cryptocurrency is a special case. Cryptocurrencies have different properties than other assets, and sometimes these can help against inflation or hurt a person’s savings. Two of the main properties of Bitcoin are.
An upward trending asset
Bitcoin is what is called an upward trending asset. This means that over long periods of time, BTC’s price always has an upwards trajectory; it increases in price.
From this perspective, Bitcoin is an excellent asset against inflation. It not only retains its value, but it actually increases in value. The percentage growth of Bitcoin beats any savings account on the planet by a very wide margin. As such, we can say that yes, any person can use Bitcoin as a hedge against inflation.
But thighs are rarely that simple. As we shall see with our next property of Bitcoin.