The cryptocurrency market in general and Bitcoin specifically, which has been around for a little over a decade, has experienced rapid expansion. When it reached its peak, the market’s value reached $3 trillion, exceeding that of some of the world’s most valuable corporations. The market still needs to expand significantly despite this increase.
If there is one thing you should be aware of before investing in cryptocurrencies, it is that they are extremely unpredictable and volatile. Values change minute by minute as a result of hype, speculative movements, and general economic conditions. Potential investors should realize that price swings are normal and should expect prices to decline further before making a purchase while the market is weak. You shouldn’t invest in cryptocurrency if you can’t handle sudden changes in the market.
Long-term store of value and an inflation hedge
Prices are increasing due to a number of factors, including the COVID-19 epidemic, cheap interest rates, increased government expenditure, economic stimulus, and pent-up demand for products and services. Here are the major reasons why Bitcoin and cryptocurrency would make a good inflation hedge:
- Bitcoin is unrelated to any one currency or economy, much like gold. Additionally, it is not governed by a select few businesses or interests. Instead, it is a global asset class that represents demand all around the world.One of the easiest and most practical methods for an American to diversify their assets, income, and revenue is through bitcoin and other cryptocurrencies.
- There is no possibility of inflation because there is a finite amount of bitcoin, which prevents the creation of new coins. A nation like the U.S., however, can simply raise the money supply by spending money and purchasing government bonds, which will lower interest rates, lessen the purchasing power of the dollar, and unintentionally lead to inflation.
- Bitcoin is secure, rare, easy to exchange, and durable like gold. Bitcoin is, however, also transportable, transferrable, and potentially more decentralized than gold. Most sovereign states, including the United States, China, Germany, and other European nations, have control over the supply of gold. Theoretically, Bitcoin is easier to keep and safeguard than gold for anyone in the world.
Freedom of transaction that comes with Bitcoin
Using cryptocurrency has many ways in making sure that there is as much freedom for the users as possible.
- Cross-border money transactions are expensive and challenging. But using cryptocurrencies can be simple and affordable. Although Bitcoin transfers might take up to 10 minutes, most transactions happen instantly.
- Decentralized finance is one of the most discussed applications of the blockchain, which underpins cryptocurrencies . DeFi intends to develop an open-source, permissionless, participatory, and transparent financial ecosystem that runs without any central authority, in compared to conventional finance, where a mediator is at the center of all transactions.
- Your actual assets can function as a form of cash by using the concept of cryptocurrency, a digital coin. Users can list a physical item, like a piece of real estate, on a blockchain network of their choice. They must upload additional pertinent information, such as ownership details and a basic set of guidelines, just like they would for any ICO .
- Digital assets like a work of art or a one-of-a-kind game character that are only accessible through a blockchain network are examples of non-fungible tokens. You can view them as a cryptocurrency derivative even though they aren’t truly cryptocurrencies.