Since a while, inflation rates are on the rise. The Fed’s indiscriminate printing fiat money has led to an increase in inflation rates. This has caused investors to be increasingly concerned, particularly those who are investing long-term. United States inflation rates have now risen to 7% as Biden’s administration continues to be rocked by inflation concerns.
Investors have been looking to find ways to hedge against rising inflation due to the rate of growth. The standard inflation hedge has been gold. For decades it has been dominant on the market and has been the standard store of value for human civilisation for thousands of year. Investors have started to abandon gold because its inflation rates have fallen significantly, rendering it unsuitable as a hedge.
The Inflation Rates are on the Rise
Express Recent inflation rates have outpaced wage growth. With the US currently at 7%, this has been a rising trend. Bernie Sanders was a US presidential candidate who expressed concern over this rate, saying that it has led to younger generations living at a lower standard than those of older generations.
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Sanders pointed out that inflation has driven college and housing prices up by 163% and 72% respectively, compared with 20 years ago. This was unacceptable for the American politician who stated that “The time for action is now.”
Bitcoin is Saving the Day
While lawmakers focused their attention on inflation and how it affects the economy, investors now focus their efforts on protecting their investments from inflation. Investors can lose money even if they make a profit on their investments. This is what has driven investors to bitcoin.
While the US’s inflation rate stands at 7%, the bitcoin year-over-2018 return was more than 140%. Traditional investors still prefer gold, although bitcoin is fast becoming their preferred investment choice.
Bitcoin has beaten gold since its inception | Source: XAUBTC on TradingView.com
Compared to gold, the S&P, and Nasdaq, bitcoin has consistently blown it out of the park in terms of returns. Because it has a cap of 21 million coins, the asset is deflationary. It is not possible to print out the currency from thin air so it has a value that increases rather than decreases.
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To hedge against inflation, institutional investors are increasingly turning to digital assets. Response to video clip from Fox News that highlight the high inflation rates rocking the country, Michael Taylor, CEO of MicroStrategy, replied that “Inflation is the problem and Bitcoin is the solution.”
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