Inflation rates have been rising for some time now. This is attributed to the indiscriminate printing of fiat money by the Fed and has been a growing concern to investors, especially those investing for the long term. United States inflation rates have now risen to 7% as Biden’s administration continues to be rocked by inflation concerns.
This high growth rate has led investors to look for ways to hedge for inflation. Now, gold has always been the standard inflation hedge. It has dominated the market for decades, and for thousands of years of human civilization, it has been the agreed-upon store of value. However, investors have begun to flee gold as its returns have dropped significantly below the inflation rate, making it an unsuitable hedge.
Inflation Rates Skyrocket
that inflation rates have now outpaced wages in recent times. This has been a growing trend and has now come to a head with US inflation rates clocking 7%. Former US presidential candidate Bernie Sanders had expressed concern for this rate which he said has seen younger generations having a lower standard of living compared to the older generations.
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Sanders noted that inflation had driven the prices of housing and cost of college higher by 72% and 163% respectively compared to 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 have focused on how inflation is affecting the economy and standard of living, investors have turned their focus on protecting their assets from inflation. Even when investors make a profit from their investments, if the inflation rate is higher than their percentage of return, then they are losing money. It is this concern that has pushed investors more towards bitcoin.
For starters, while the inflation rate is currently 7% in the US, the year-over-year return for bitcoin had been more than 140%. Gold still appears at the top of the list for most traditional investors, but bitcoin is quickly becoming the preferred choice.
Bitcoin has beaten gold since its inception | Source:
Compared to gold, the S&P, and Nasdaq, bitcoin has consistently blown it out of the park in terms of returns. The asset itself is deflationary given that it is capped at 21 million coins ever. Since governments or entities are not able to print it out of thin air, it retains its value, which increases instead of decreases due to inflation.
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Institutional investors have also increasingly taken to the digital asset to hedge for inflation. Responding to a 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.”
Featured image from iStockPhoto, Charts from TradingView.com
