Is Bitcoin a hedge against inflation?

As we enter 2022, the word “inflation” will continue to be used frequently in news, media and financial headlines. In light of the pandemic, governments around the world have been printing huge amounts of money, raising concerns about the effects this is having on national economies. The most intelligent cryptocurrency trading platform, Biti codesallows for easy trading.

One of the main economic concerns that many investors, analysts and economists have is inflation, which causes a lot of worry, anxiety, instability and a general lack of confidence in the markets. Let’s examine what inflation is and some of its causes.

Let’s understand inflation

It helps to have a basic understanding of how the economy works, specifically how interest rates are managed by central banks to encourage lending and borrowing, to better understand inflation. Inflation is described as a gradual depletion of a currency’s purchasing power over time. A measure of how quickly one’s purchasing power deteriorates over time in an economy is the average price increase for a number of products and services.

What causes inflation to occur?

Many factors can contribute to inflation, but the most important is a growth in the money supply, with significant amounts of money printing in general, which was witnessed in the wake of the pandemic. Persistent inflation, according to the majority of investors, occurs when a nation has a greater money supply than it has economic growth.

Types of inflation

Cost-Push Inflation: When prices rise as a result of rising production costs, commodity prices and labor costs, this process is known as cost-push inflation. Despite a constant demand for goods, there is a decreasing supply due to rising production costs. Customers must therefore incur additional costs as a consequence. An example of this is the energy industry, which most often experiences cost-pressing inflation in the form of rising oil and gas prices.

Demand-Pull Inflation: High demand for goods or services can lead to demand-pull inflation. In the event of an unforeseen increase in demand, prices may rise as a result. In the short term, this type of inflation is not a cause for alarm, but a long-term increase in demand can have an impact on the entire economy and drive up the prices of other goods and services.

Built-in inflation: The main source that drives this type of inflation is the expectations that come from people. People have become accustomed to expecting inflation to increase year after year. Everything from the price of products and services to wage growth over time can be attributed to this expectation.

Any claims as to why people are taking Bitcoin as a stronger hedge against inflation than gold?

The supply of bitcoins, which is set at 21 million, is generally known to investors, but the exact amount of gold is unknown.

• Furthermore, Bitcoin can be stored on a billion dollar flash drive, making it significantly more portable than gold.
• Since we can almost instantly move someone anywhere in the world with any amount of dollar value of Bitcoin using just a mobile device, Bitcoin makes value transfers easier. However, gold cannot be transported comparably.
• Bitcoin is easier to hold, more secure and has the potential to be more useful when used as a secure network.
• In addition, unlike stocks, which are owned by a small number of companies or shareholders, bitcoin is not linked to the risk of any economy or currency and has a lower exposure risk to third parties.

Conclusion

Both gold and bitcoin have been hotly contested topics among investors. However, the investor is the only one who can decide which one to choose for a safer investment. However, the assumption mentioned above will certainly help you make an assessment.