The recent turmoil hitting Silicon Valley Bank, Silvergate and other banks has increased interest in ways to secure wealth without a bank. Crypto is often considered an inflation-resistant asset, but can bitcoin really be a hedge against inflation?
” – in reference to the yellow metal, another beloved inflation-resistant asset. So-called stores of value assets stand the test of time because they are uncorrelated with other assets and are resistant to entities that interfere with the market. But are cryptocurrencies like bitcoin really a hedge against inflation?While the U.S. dollar has fallen, bitcoin has far outpaced its value, rewarding early investors.
In the past few years, bitcoin has tracked the U.S. stock market, which performs well when the economy is stimulated and stutters when spending decreases – like in times of high inflation. When inflation reached 40-year highs in December 2021,. The question of whether bitcoin is a long-term inflation hedge is difficult to answer without the benefit of hindsight.
However, not all cryptocurrencies work like bitcoin. Some cryptocurrencies are deflationary – meaning that the supply decreases over time, designed to increase the value of the coin over time . Other cryptocurrencies have dynamic supplies, and some tokens, like non-fungible tokens , are one of a kind – like a piece of fine art, their value is dependent on their uniqueness., but as the asset class develops, it may hold a similar place to gold for investors in their portfolio.
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