At a time when most economies, assets, and fiat currencies suffered due to the onset of the coronavirus, Bitcoin and other crypto-assets remained relatively healthy. They even saw increased adoption as people saw more value on these assets. Now the question is if Bitcoin can serve as the perfect hedge against inflation?
Can Bitcoin Be the Perfect Hedge?
Many seem to agree with this notion. In a recent report by P2P trading platform LocalBitcoins, the largest number of hodlers on the platform are from Zimbabwe, where citizens put money on Bitcoin to hedge on inflation. It’s not only in the African nation where people look to crypto to fight increasing inflation. Venezuelan citizens have also adopted Bitcoin to combat hyperinflation.
A recent survey showed that many citizens of the Latin American nation were actively looking for how to invest in Bitcoin as the appetite for crypto assets grows. They seek to prevent their money from losing value.
As an asset, Bitcoin has its strong points. It offers holders the potential to grow the value of their investment. The only problem with Bitcoin is high price volatility, which casts doubt on its ability to retain value. Incredibly this is not bad as it offers users a chance to profit. There are plenty of platforms that help individuals profit from this volatility.
One such platform is PrimeXBT, where traders can speculate on the rapid price movements of BTC and earn returns by trading derivatives associated with the asset. This means you don’t have to own the actual asset. Additionally, traders get a capital boost where a small amount allows the individual to gain greater exposure within a specific market, thereby multiplying their returns tremendously.
Over the past year, the number of individuals joining platforms such as PrimeXBT has grown since they offer a quick way to profit from the red hot Bitcoin market without dealing with the actual asset, which can be complicated for people less knowledgeable about cryptocurrencies.
And the majority of these individuals come from countries with high inflation rates with poor economies, and fewer jobs for citizens.
Not only is Bitcoin helping them hedge against inflation, but it’s also offering them a chance to make a living by trading the actual asset or financial instruments linked to the coin.
Experts Seem To Agree
Experts also seem to agree that Bitcoin can be the perfect hedge against inflation. According to Cathie Wood, the CEO of ARK Invest, “I believe there is no better hedge against inflation than Bitcoin. As we know, gold has been moving, although now it’s lagging Bitcoin fairly dramatically, so there’s probably some share shift, but I do believe that both of them will do well over time.”
Wood goes on to add that she expects BTC adoption among institutional investors and major companies to rise. “I think we’re going to hear about more companies putting this hedge on their balance sheet as well, particularly tech companies who understand the technology and are comfortable with it.”
And she was right. A week after this statement was made, Tesla revealed that it had invested $1.5 billion in Bitcoin. The company said it wanted to maximize the performance of its cash reserves. Now there are rumors companies such as Apple might follow suit. And if this happens, then expect Bitcoin’s market cap to edge closer to that of gold.
Since the beginning of the year, not only has Bitcoin surpassed its past peak price of $20,000 but managed to double it. In less than three years since the last peak, Bitcoin is now looking to cross the $60,000 mark. If you are wondering what has spurred this kind of growth, listen to what Wood has to say; “Usually when there’s a parabolic move like Bitcoin enjoyed in 2017, it usually takes a generation for that asset or that stock to get back to that peak. I think part of this or the follow-through might have been triggered by again the bond yield pushing, doing what many people did not expect it to do.”
Now the sky is the limit for Bitcoin. So far, it’s ticking all the right boxes as a hedge against inflation even though you have to acknowledge that it’s volatility remains a concern, at least for long term hodlers. But for short-term traders, the volatility is excellent as it offers opportunities to make a profit.