Inflation hedges like gold, real estate are effective, but bitcoin and other cryptos are emerging as wealth protectors: report
The team of the digital assets company octopus has released a new report on inflation that they refer to as the “insidious thief”.
As mentioned in a blog post by Kraken, the concept of inflation “is back to the fore for many market participants, but not everyone is sure what impact inflation will have on crypto markets”.
As the digital currency platform notes, many people have speculated for years that the “disinflationary nature” of Bitcoin (BTC) could be its “greatest boon” in the face of an inflated US dollar. As a global reserve currency, the US dollar is “uniquely tied to many international business transactions and investments,” Kraken explains, noting that the cost of goods and services could rise if the dollar “begins to feel inflationary.”
As shared by the Kraken team:
“The latest economic data has sparked newfound fears that not only is inflation rising, but inflation is also trending higher than expected. We are investigating whether many of the disinflationary theories surrounding Bitcoin will be true. “
To help market and industry participants better understand what inflation really means for the global economy and its impact on crypto assets, Kraken intelligence has published an extensive research report on this economic problem.
As Kraken explains in his detailed report:
“Inflation is usually a direct result of central banks creating money faster than GDP”
Growth. However, this imbalance does not always lead to inflation: money can come in
Circulation without causing inflation. For example, allow increased investment
technical innovations that are generally deflationary (ie cause commodity prices and
Services to drop); When businesses can produce goods and services at a lower cost and faster than consumers can ask for, prices go down. In other words, new money is not always spent lightly. Some can save or pay off debts. Although the supply of money is greater than before, the speed of money has decreased (ie the rate at which money is exchanged within an economy). “
The report further noted:
“Because of the seemingly innate tendency of the government and the central bank to drive inflation adversely high, people have learned over time how to better store their wealth to protect themselves from abnormally high inflation rates.”
Although assets such as gold, real estate, inflation-adjusted bonds, and certain stocks have proven useful hedge against negative inflationary effects, the rise of bitcoin and crypto assets has “challenged some market participants on how to protect their wealth” in today’s modern economy “Added the report.
As the Kraken Intelligence report shows, this gradual shift in beliefs and thinking is “common to institutional investors such as corporate investors MicroStrategy‘S Michael Saylor, Bridge water‘S Ray Dalioand legendary investor Paul Tudor Jones, downright vocal support for Bitcoin. “
You can view the full report here.