Bitcoin (BTC), the most valuable cryptocurrency, has taken the world by storm over the last few years because of its gold-like properties. This is primarily due to the limited supply of bitcoins that can be minted, amounting to a maximum of 21 million in total.
Assets that have similar properties are considered highly valued, such as some precious metals. However, Bitcoin is the digital counterpart to a precious metal as it can’t do much in terms of utility, but has become immensely popular because
of its scarcity and divisibility.
Inflation Hedge
As inflation has continued to run rampant in most countries, including the United States with an inflation rate of <u>8.5%</u> as measured by the Consumer Price Index (CPI), it has become a necessity to hedge an investment portfolio to counter devaluing currencies.
Gold, bonds, and other assets have traditionally been a good way to hedge a portfolio. However, Bitcoin has become a far easier method because of the worldwide adoption of smartphones and other digital devices. Since becoming so popular, it’s never been easier to purchase bitcoins through trusted and secure brokerage platforms. Fortunately, bitcoins are divisible up to eight decimal points, making it possible for investors with less upfront capital to start obtaining their own piece.
Bitcoin’s Performance
While past performance is certainly not indicative of future results, it’s important to note how Bitcoin and other assets run in very similar cycles. For Bitcoin, it rises in the case of uncertainty.
As inflation rose globally in 2020, Bitcoin’s price began to surge, from $7,300 USD to over $32,100 USD. Till this day, Bitcoin’s price has become less volatile and settled close to $41,000 USD as inflation continues growing in many countries around the world.
Conclusion
While Bitcoin is still speculative because of its widely new introduction to investors, it should be considered as a hedge against market uncertainty, similarly to gold. After all, historical price action aligned with current events seems to be in favor of doing so.
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