US Inflation Soars to 7%, So Deploy Bitcoin as a Hedge

Inflation: Wherever you go shopping, prices continue to rise, from groceries to housing, electricity and more.

After a record 7.1% YoY CPI rise, the highest for the first time since 1982, US households may begin to wonder how they can protect and even grow their hard-earned money against rising inflation.

Creeping inflation is not just happening in the United States, but it is also happening in Europe and different parts of Asia and Latin America as the world continues to navigate through the global pandemic.

But until the world comes out of this period of inflation, people are looking for new ways to invest their money and protect the wealth they have already accumulated.

Since the start of 2020, Bitcoin has appreciated over 700% and has acted as an effective hedge against inflation. Let’s explore why bitcoin can be a good solution to hedge against inflation and even grow your wealth over time.

Inflation Hedge: A Fixed Bitcoin Supply Means Printing Dollars Can’t Devalue It

The theory behind Bitcoin as an inflation hedge is simple. The number of Bitcoins is limited to 21 million. This is when the number of US dollars and other fiat currencies continues to increase over time. In theory, this limited supply should mean that Bitcoin is a good hedge against the increasing supply of the US Dollar.

If you’re worried that you won’t be able to buy a full Bitcoin, the cryptocurrency is divisible by 1 million and it’s quite easy to buy a fraction of Bitcoin.

Keep in mind that Bitcoin is also extremely volatile, which could affect its potential as an inflation hedge. But in the long term, as more dollars, euros, and other fiat currencies are created, Bitcoin, the digital gold of the internet, will be poised to hedge against long-term inflation rates.

Governments now accept bitcoin as legal tender

On September 7, 2021, El Salvador became the first country to adopt Bitcoin as legal tender. In the United States, regulators have said they do not to forbid cryptocurrencies. So many cities across the country are trying to become bitcoin hubs, such as New York and Miami.

Other emerging countries are also considering integrating bitcoin and other cryptocurrencies into their financial system. the city ​​of Rio seeks to offer a 10% discount on taxes when paid in Bitcoin, after studying the possible legal framework. In the Middle East, the Central Bank of Iran, or CBI, and the Ministry of Commerce have reached an agreement to link the CBI’s payment platform to a commerce system allowing businesses to settle payments using cryptocurrencies.

This is just the beginning of governments adopting bitcoin as legal tender. As more governments attempt to hedge against inflation, we will see more countries adopt Bitcoin. All of this means that the price of bitcoin over time should in theory rise, making it an excellent long-term inflation hedge.

Inflation hedge: Generate income with cryptocurrency

One of the greatest opportunities in this lifetime is to generate high yielding passive income with cryptocurrencies. This means you don’t have to just hold your Bitcoin and wait for it to appreciate. But you can also earn interest on your digital gold – even over 2.5% per year.

Today, HODLers, or people who simply hold crypto, are turning to cryptocurrency savings accounts because they pay high interest on their Bitcoin and other digital assets. Interest rates on bank deposits are almost negligible – often less than 0.5% – compared to those on a crypto savings account – up to 12% annual percentage yield (APY).

When looking for crypto platforms to work with, you should look for three main aspects, lending policy, security standards, and reputation.

Regarding reputation, I mean that the company complies and obeys the laws of the country. It also means that the company takes risk management and the protection of its clients’ assets very seriously.

Select a cryptocurrency savings platform that takes a security-first approach. They should use Fireblock’s multi-party compute wallet infrastructure to secure the funds. And make sure all customer digital assets are insured.

Loan policy

The lending policy should also be a big concern and should be very selective with its capital requirement and lend to entities with good credit ratings with a loan to value ratio of its loans of around 70%. This reduces the risk of default.

The bottom line is that although Bitcoin is a volatile asset, it can help consumers protect themselves against inflation by simply being a deflationary currency and helping them generate high yielding passive income.

Another option is to use stablecoins to generate income. Stable coins are pegged to the USD. This makes them significantly less volatile than Bitcoin and Ethereum. You can deposit stablecoins into floating and fixed cryptocurrency savings accounts, allowing you to generate high returns with little volatility.

This is how you stay one step ahead.

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