The U.S. Federal Reserve says that inflation is when the prices of goods and services go up in general over time. Some people think this rise has something to do with changes in the money supply or the way money moves around in general.
In the world of cryptography, this term is not used in the same way that economists do. Instead, they use it to talk about the rise in the total amount of traditional money.
Most people who like and support Bitcoin say that inflation happens because the government prints more money.
When the amount of two commodities or goods changes, the one with better quality becomes cheaper. Most of the time, this is how foreign exchange works.
Some governments take on debts and then print money to reduce the value of the national currency. Basically, printing money causes inflation, which lowers the value of the regular currency.
Even the value of your investments, savings, and bills will go down. Because of this, people have wished for a long time that they could have a magical asset to protect them from the way the government controls fiat currency.
During times of inflation, the value of an asset that central banks and governments can't control would stay the same and even go up.
Bitcoin and Inflation
During times of inflation, people put their regular money into safe places or assets that keep their value over time.
For example, gold is a safe haven asset that people have always used to protect themselves from inflation. This is because the value of this valuable metal has stayed the same even when the economy has been bad.
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So, with its wild price swings, can Bitcoin be used in the same way? Bitcoin is volatile, but it has no central control. This means that the central bank or government can't change this virtual currency.
At the moment, all the cryptocurrencies in the world are worth about $265.
Seventy percent of this amount is made up of bitcoin. That's why a lot of investors are buying this virtual currency on sites like British-bitcoinprofit.com. You should be able to use fiat money to buy Bitcoin on these crypto exchanges.
How Bitcoin Can Hedge Against Inflation
Raoul Pal, Paul Tudor Jones, Marc Lasry, Mike Novogratz, and Bill Miller are just some of the successful investors who are betting on Bitcoin.
But the main reason to buy this virtual currency is that it is a good way to protect against inflation. This is why.
- Portability: Many people have learned through the COVID-19 pandemic that governments can close borders. Because of this, a lot of people want to own things that are easy to sell. Bitcoin is the best choice for most investors because they can use a computer or phone to get to it at any time and move it right away.
- Liquidity: During a crisis, it's important that assets are liquid. With more people losing their jobs and going bankrupt, especially during a global pandemic, people and businesses need assets they can quickly turn into cash to pay for services and goods. Bitcoin is a good that can be traded around the clock, every day of the year.
- Purchasing power: Satoshi Nakamoto made Bitcoin because the 2008 financial crisis showed how flawed the traditional financial system was. Satoshi limited the number of Bitcoins to 21 million. This means that inflation and printing more money can't lower the value of Bitcoin as they do with regular currencies.
Conclusion: Can Bitcoin Prevent Inflation 2022?
Money printing is one way that many governments try to help their economies grow. Unfortunately, this leads to inflation, which can make regular money less valuable. So, most investors are more interested in creative assets like Bitcoin.
Satoshi Nakamoto made Bitcoin so that it would keep its value over time because there are only so many of them. Also, Bitcoin is more liquid because it can be traded around the clock.
Also, this virtual currency is easier to move around because all you need to send Bitcoin across borders is a smartphone, computer, or tablet with an internet connection.