Gold has traditionally been regarded as a safe long-term inflation hedge. However, since then, the world has undergone major changes. Anti-inflation cryptocurrencies can now be used. Since it is the most prominent and complete of all cryptocurrencies, Bitcoin has the potential to become a larger hedging tool than gold itself. This is the reason.
The supply of Bitcoin is limited.
With a fixed number of 21 million coins, approximately 19 million of them have been produced, making Bitcoin a better inflation hedge than most other cryptocurrencies. There is no possibility of inflation, because the supply is fixed and the new currency cannot enter circulation. On the contrary, countries like the United States can increase the money supply through consumption and purchase of national debt to reduce interest rates, weaken the purchasing power of the dollar, and unknowingly create inflation.
Bitcoin is a convenient store of value.
Bitcoin, like gold, is durable, easily interchangeable, secure, and has a limited supply, just like gold. However, Bitcoin is different from gold in that it can be carried, transferred, and is considered more decentralized. Sovereign countries such as the United States, Germany, China and other European countries have a significant impact on the supply of gold. Individuals anywhere in the world can save and preserve their bitcoins more easily than gold.
In the eyes of "Gold Worm", Bitcoin is nothing but a Ponzi scheme. However, Bitcoin's blockchain technology has practical applications. Bitcoin has almost no practical application in developed countries where the domestic currency is relatively stable as a medium of exchange. However, in economies prone to political turmoil and hyperinflation, Bitcoin is a more popular medium of trade.
Bitcoin is not restricted by a single currency or economic system;
Gold and Bitcoin are decentralized digital currencies and have nothing to do with the central bank or economy of any country. No one company or one party can completely control it. Rather, it is a global asset class that represents global demand.
In order to cope with the decline in the value of liquid assets, American investors must take greater risks when inflation is strong. For example, a dividend yield of 3% can be used as a supplement to retirement income. However, if the inflation rate is 6%, this is simply unacceptable.
The long-term return of the Standard & Poor's 500 Index is between 7% and 8% per year, which is only slightly higher than current inflation. In the past ten years, the return of the S&P 500 has been much higher than its 10-year average. Because of these outstanding returns, the value has risen significantly in recent years. This is not necessarily a good thing. For investors who want an annual income of more than 6%, even in high-value situations, investing in US stocks is the only viable option. Nevertheless, in the long run, the US stock market is widely regarded as having the most favorable risk/return profile.
Bitcoin may be an alternative to stocks because it avoids many economic and political issues related to the U.S. stock market. Therefore, cryptocurrency is the most direct and practical way for Americans to diversify their income and assets outside the U.S. economy.