Before getting into the sophisticated stuff let’s first get into INFLATION itself, leap to know what it is and how is it going to affect a normal citizen.
In simple words, INFLATION is the loss of value of a currency. If a person could buy a piece of land for 100$ in the 1990s that same would not apply to today’s scenario, this is because that particular currency has lost its value over a while. Statistically, Inflation is growing at a rate of 6% annually! A decent shock to one’s pocket, so how are we going to beat it?
TOOLS TO BEAT INFLATION
As time affect the value of cash, many people have now used multiple tools to protect their hard-earned money by putting it into investment tools like, real estate, gold, mutual funds, stocks, and now cryptocurrency being the latest of all. Despite its arrival, the question remains the same; will it be keeping up with inflation?
Let’s look into each of these and see how they stood against Inflation
Gold is a tool that is provided from one generation to another but statistically speaking gold has had times where it has shown negative value like in the 1980s when it was supposed to hedge against inflation it kept falling. But also in a time of crisis when the market goes south, gold acts as a shield for an investor’s portfolio.
Real estate is another tool that is/was supposed to protect us against inflation but after the US Housing market crash; it is a big hit to make us think of another way around it as an investment tool, the data from the National Association of Realtors (NAR) shows a fall of 13% in sales, from 554,000 to 482,000 in March 2006.
Stocks as a modern-day weapon to fight against inflation, let’s be honest here. When it comes to stocks an investor needs to know the very basics of a company’s business, operation, management, customer base, liabilities, assets, debt, etc. A fundamentally strong company is considered a good-to-go option for asset accumulation, but does every investor is well aware of it?
Some stocks do help as a good investment to protect the overall value of a portfolio and very often go up in value but it becomes very important to pick such stocks and not be shaken by a small correction in the market.
BITCOIN, could it be a proper vehicle to ride over the terrain of inflation? Supply and Demand are a big factor playing in its favor as Bitcoin has a limited supply and because of its previous performance, everyone seeks to own a piece of it and the demand keeps rising over time.
Limited supply introduces scarcity among people; the supply of BITCOIN has been limited to 21 million coins and by the end of 2021, 83% of these coins have already been mined and are in circulation, a total of 18.77 million of these.
Decentralization is another big factor for it as no single body governs Bitcoin. With millions of nodes working together across the globe it becomes almost impossible to break in and attack its monetary policies.
The Bottom Line
Every investment tool had its time and with the generation gap there are so many different investment tools that come into existence to the very old times only land and gold used to be sheltered under the tag of the asset but over time we had stocks and that is something we still use to look for the economic performance of a nation but the returns that we have registered with BITCOIN is something different.
As an asset, Bitcoin has worked mind-bogglingly well and it has beaten inflation by a huge margin. Statistics also reveal that Return on Investment (ROI) with Bitcoin is significantly higher than with Real estate, gold, or stocks.