One of the reasons why the popularity of crypto assets is growing all over the world — for both businesses and individuals — is the fact that many investors perceive it as a main or additional shield against inflation. Today, we would like to share our perspective on why people think so.    

Current Landscape

Rising inflation rates are a serious issue nowadays. Both the COVID-19 pandemic with its disruptions and the ongoing political turmoil contribute to it. As the New York Times reports, roughly 60% of what is called ‘developed countries’ – including the US and the Eurozone – are affected by it. It means that all these nations are facing annual inflation rates exceeding 5%. 

Quite unexpectedly, both individuals and companies are searching for a hedge against it. Some invest in gold, some opt for real estate, some prefer securities and shares. However, many have identified crypto as their shield of choice. 

Survey 

This observation can be substantiated by the following figure: 40% of America’s crypto owners view their digital assets as ‘a hedge against inflation.’ The key motivator in this respect is the fear of ‘inflation in the US is running at 40-year highs.’ What makes people believe in the anti-inflationary potential of crypto? 

Why Is It So?

Coinbase stresses the following obvious reasons why one can rely on crypto in the race between BTC and ETH and inflation: 

  • First, in spite of the fact that crypto assets are influenced by national governments, they are not controlled by national governments. As a result, there is less space for direct manipulations

  • Second, the level of resilience to inflation is determined by the fact that we are dealing with limited supply. Bitcoin, unlike fiat currencies, is and will stay scarce by default

  • Third, Bitcoin is predictable in terms of ‘emission’, i.e. the ‘scheduled tapering of new supply over time’ 

Finally, one more thing one can stress is the lucrative stalking opportunities offering great returns on crypto assets held.