Is Crypto a Good Hedge Against Inflation?

Is Crypto a Good Hedge Against Inflation?

Crypto against inflation— will it drive profit or loss in digital wallets?

The US Bureau of Labor Statistics just dropped a bombshell. In the last 12 months ending in January 2022, inflation rose 7.5% percent. That's the highest level in the last 40 years. But whereas in the 1980s investors would have turned to precious metals like gold as well as real estate to hedge funds against inflation, crypto didn't exist back then. Bitcoin has only been on the scene since 2009, but the over 12,000 tokens it's brought along are making money investors ask: is crypto a good hedge against inflation?

The reasons for asking this question are clear. If you're not investing your money, it's losing value as you read this article. Even gold entered 2022 making a –5% loss. Meaning that traditional go-tos for investors seeking to beat inflation are not as safe as they were. This is where the Web 3.0 era comes in (Web 3.0 or Web3 refers to an Internet operated on blockchain technology). The safest legacy crypto assets are Bitcoin (BTC) and Ether (ETH) linked to the Ethereum network. Both coins operate on their native blockchain, which acts as a global ledger that is decentralised by nature and open to anyone. They're volatile in nature – Bitcoin's value swung around $30,000 throughout last year – but have also shown year-on-year gains. Bitcoin is currently trading at $42,226 as of Feb 14 and is down around 9% from the beginning of the year. However, when compared to February of 2020, BTC is up 390%. Even with inflation at 7.5%, Bitcoin has proven to be a good longer-term asset to hedge investments.

ETH is trading at $2,900 as of Feb 14. The coin's value is down around 15% from the beginning of the year – but again, compared to last year, it's up over 65%. A report from the Bank of America suggested that crypto assets were still volatile as investments – however, the report noted that more and more people were turning to crypto to hedge investments. BTC's and ETH's performance over the last 12 months show why.

There are more than 12,000 digital currencies minting and trading on the world's blockchains. Not all of them will be as robust as BTC and ETH. Some are duds, some lack utility, some are based on memes, but some could become the next top 20 cryptos. These coins are called 'altcoins' because they followed in the footsteps of Bitcoin, the original cryptocurrency. Ethereum is also of long-standing, though both have come under fire recently: Bitcoin for energy-intensive Bitcoin mining, and Ethereum for slow speeds and higher fees experienced in the summer of last year.

Analysts over at MarketRealist suggest diversifying your portfolio into crypto, even if a little at first. Research the altcoins making waves on the Internet, and try backing a few of the next likely success stories.

One of the most promising crypto gainers in 2022 is EverGrow. This newcomer – launched in September 2021 – is currently developing the world's first content creation platform that integrates both crypto and fiat payments. EverGrow's Crator will launch in the next few months and could disrupt the way that people connect and content creators create. Crypto coins have struggled to develop both real-world utility and become attractive to non-crypto enthusiasts. Companies like EverGrow are investing in development to make this happen in 2022. 

EverGrow's team of top finance professionals, developers, and marketers are also about to launch a P2E game, staking pools, and have recently announced a partnership with SafeMoon. Both EverGrow and SafeMoon are now positioned as the world's top 2 rewards tokens, which payout distributions (sort of like dividends) on a daily basis. EverGrow pays its coinholders in Binance pegged US Dollars (BUSD) meaning that investors can generate passive income with real-world benefits while they hold on to their coins.

Bitcoin remains the biggest cryptocurrency on the market, which was accepted by Tesla for example as payment in 2021 before Elon Musk backtracked over issues of climate change and energy-intensive Bitcoin mining. Ethereum is the crypto number 2 but has been challenged by new blockchain platforms like Polkadot and Avalanche. RippleNet's native XRP token is also linked to software that promises ultra-fast monetary transactions around the world within seconds, and without banks of high fees in between. 

Technology is more advanced than in any previous periods of high inflation, and cryptocurrencies are proving why this could change the way the world does finance. More than anything, this is what crypto promises than gold or precious metals never can: changing the way the world works in the future. The risks are clear. Research is key. But there's never been a better time for backing crypto than now. 

Disclaimer: Analytics Insight does not provide financial advice or guidance. Also note that the cryptocurrencies mentioned/listed on the website could potentially be scams, i.e. designed to induce you to invest financial resources that may be lost forever and not be recoverable once investments are made. You are responsible for conducting your own research (DYOR) before making any investments. Read more here.

Related Stories

No stories found.
Analytics Insight