3 tips on investing in crypto during inflation
Tired of rising prices while your salary remains unchanged? Fed up with working hard to save, only to see your money lose value a few months later? Believe us, we are tired of this too. Find out how you can preserve the value of your money and be more secure in the future by investing in cryptocurrencies.
The term “inflation” comes from the Latin word infla-tIo, which means “blow”. It refers to the overall rise in prices for goods and services. This happens when there’s too much money circulating, causing its value to drop, and prices to rise.
Simply put, you buy a pair of cool pants for $20, and after a year, six months, or even a month, their price rises to $35. The product remains the same, so does the quantity, but there is more cash in the market.
Currently, traditional currencies experience relatively high inflation. You can see this on the map created using data from the International Monetary Fund.
In some countries, it reaches two-digit and even three-digit numbers! For example, in Argentina, the inflation rate is 138.3%, and in Venezuela — 318%!
In comparison, the inflation rates of leading cryptos like bitcoin and ethereum is relatively low. According to Glassnode analysts, the monthly inflation rate for bitcoin is 1.736%, and for ethereum, it’s 0.18% according to Ultra Sound Money.
Why do cryptocurrencies have such low inflation rates, and what makes them a great investment choice? Let’s break it down!
Limited supply of cryptocurrencies
Many cryptocurrencies have a limited supply. Unlike fiat money which can be printed endlessly. Take bitcoin, for instance, with a fixed cap of 21 million coins. This restriction puts a ceiling on inflation.
Moreover, bitcoin experiences a halving event every four years, automatically reducing the mining reward, slowing down the rate at which new bitcoins enter circulation.
In the case of other cryptocurrencies like ethereum, they use a method called burning to prevent inflation. This involves destroying a portion of coins at scheduled intervals.
Decentralisation of crypto
Cryptocurrencies operate without control from central banks or governments, making them decentralised.
Yet, this lack of oversight comes with its own set of risks. So, it’s crucial to thoroughly research and analyse information when deciding which project to invest in.
Crypto as an alternative to national currencies
In countries with unstable monetary policies, crypto steps in as an alternative to local currencies. People in these regions use it for both saving money and making transactions.
Take Ukraine, Turkey, Argentina, Thailand, and various African nations as examples. That’s why these regions often score high in crypto adoption rankings.
Invest for the long term
Cryptocurrency also has the benefit of performing well over the long term. While the values of assets can fluctuate due to changes in prices, the return on investment in digital currency might increase significantly in the next five years and beyond, potentially counteracting global inflation.
By the way, analysts from the Bitcoin Strategy Platform reveal that 76% of all currently available bitcoins are held by long-term investors.
Moreover, cryptocurrency is still in the early stage of development. Although the market capitalisation already exceeds $1,33 trillion as of 8th November 2023, there is still enormous growth potential.
Transparency and immutability of crypto
And finally, what makes crypto different is transparency and unchangeable rules. Although there are occasional alterations to the codes of blockchain project protocols. But they usually happen with the community’s agreement and follow existing rules.
For instance, after the update, the amount of available ether in the market began to decrease. Imagine what might have occurred if this update hadn’t been implemented.
Read about 3 tips on how to invest in crypto with minimal risks on EXMO.com
