Due to the coronavirus pandemic, the world is facing unprecedented situations. It caused serious health issues to millions of people and the death rate is not controlled yet. Secondly, almost every industry is heavily affected by the pandemic and most businesses shut down their operation during the pandemic. Those who are fortunate will escape from the disaster and others will lose their jobs.
Meanwhile, banks are busy printing new currencies which are going to create inflation post-pandemic. As a result, it will reduce the value of the currency, your savings as well as investment. So investors are now looking for alternative ways to hedge against inflation.
Earlier, gold was used as an asset to hedge against inflation. However, this time bitcoin will help investors to fight inflation. Many experts even consider bitcoin as ‘digital gold’ which can be used as a means of hedging for investors. Read on to understand 5 important things about bitcoin why it can be used as a hedge against inflation.
Bitcoin as A Great Investment Option During Pandemic
At the time of inflation, investors look for a haven asset to keep their store value for a long time. Gold was used as a haven asset from years and hedged against inflation. But what about Bitcoin, can it act as a haven asset during this inflation? Well, many questions have arisen on the store value of bitcoin.
Due to the volatile nature of bitcoin, many people don’t consider it as a safe asset for hedging against inflation. But the main thing is that bitcoin and other digital tokens are working in a decentralized network that can’t be manipulated by the government.
Apart from this, what are the other reasons that qualify bitcoin as a safe asset to hedge against inflation?
- Independent of Governance
First, bitcoin and other cryptocurrencies are independent of the government. So the government can’t manipulate the value of bitcoin. As you know, blockchain the underlying technology behind bitcoin is denaturalized in nature, no third party like the government or banks would have any control over the valuation and devaluation of bitcoin.
- Constant Supply
Unlike currencies, bitcoin has a constant supply of 21 million units so there is no chance of devaluing its value. But currencies can be printed without any upper limit by the government and it can devalue the value of the currency. Whereas bitcoin can’t be devalued due to the constant supply.
- Enough Liquidity
Although bitcoin is not a very old investment option but due to its valuation, there is always high liquidity. To make it simpler let me explain the term liquidity first. Liquidity means it is free of any discounts or premiums while you trade an asset. Which means you can buy and sell an asset easily at any time without any problem. Due to high liquidity, bitcoin is a great investment option for the pandemic too.
- Purchasing Power
First of all, let us know what is the purchasing power of bitcoin. This means the amount or number of goods or services that you can purchase with one bitcoin. As I have mentioned above, bitcoin works in a simple supply and demand mechanism.
To maintain the valuation of bitcoin the anonymous founder of bitcoin, Satoshi Nakamoto has set the supply units of bitcoin to 21 million. As a result, nobody can devalue the value of bitcoin and it solely depends on the public. The intention behind this is to keep the purchasing power of bitcoin in the hands of democracy, not in the hands of the government or central banks.
After the pandemic, we came to realize the importance of the portability of your asset. Unlike other assets, bitcoin can be transferred and stored on a smartphone and computer. The easy portability features of bitcoin attract many investors.
All of the above factors attract most of the investors to consider bitcoin as a haven asset during this pandemic. Hedging is a technique to manage risk in your investment portfolio to deal with situations like inflation. In my opinion, you consider your risk profile and if you want to hedge your investment portfolio then consider bitcoin. But take your decision at your own risk; invest according to your risk tolerance. If you want to invest in bitcoin then you can invest through www.bitcoin-profitapp.com on investment strategy.