Even though cryptocurrencies have gained traction in the global market, several factors now indicate that they are not a good hedge against inflation. Inflation factors have changed over the decades – it is a good idea to check what triggers investor fears.
Here are some reasons why Bitcoin may not be the tool as a hedge. Supply change disruptions, the pandemic and stimulus spending may contribute to inflation in the long run. Slow economic growth is another contributing factor. While Bitcoin and other currencies may offer some protection against too much money in the market, it doesn’t help in creating more goods and services.
Cryptocurrencies were introduced by tech startups as an alternative to traditional methods. Startups need economic growth and not stagnation. There are several ideas in the crypto world that are focused on improving and even circumventing the supply chain. There are employment opportunities for workers once the lockdowns are over. All of these options are good investments for VC firms but not a good place to park money.
Other factors like global supply chain problems, rising inflation in China and other parts of the globe, tensions and the threat of war in different parts of the world are also inflation contributors. The fact remains that cryptocurrencies have been around for just a short while. There is no track record for protection if prices keep rising. Bitcoin prices have swung wildly in a short period and investors could put their money in tried and tested assets.