Cryptocurrencies use the mechanism to cap supply as well as can act as a safeguard against inflation
The inflation reached 10.6% in October 2022, making many people uneasy. This year, this percentage lowered to 8.3% in March. Investors are looking for new ways to secure their funds, and one of the ways is investing in cryptos that show real potential for growth. The volatility of the crypto market shouldn’t be disregarded, but investing in cryptos can be the right solution when the whole financial market is going through a crisis.
Due to inflation, the value of many currencies declined. Many folks see cryptocurrencies as offering protection against inflation. Bitcoin has a hard cap on the whole number of coins that will ever be minted. For example, as the growth of the money supply overtakes the growth in the supply of Bitcoin, the price shall increase. Many other cryptocurrencies use the same mechanism to cap supply and can act as a safeguard against inflation. In terms of quantity, only 21 million Bitcoins are released as specified by the ASCII computer file. Therefore, the value will rise because of increased demand, which might keep up with the market and prevent inflation in the long run.
Moreover, investing in cryptocurrencies can yield profits. The crypto market has experienced substantial growth in the past decade, and its price movements have often been uncorrelated with traditional markets like stocks and bonds. This lack of correlation makes cryptocurrencies an appealing option for portfolio diversification. Investors can achieve more stable returns by combining assets with lower price correlations. For instance, when your stock holdings decline, your crypto assets may rise, and vice versa. However, it’s essential to acknowledge that cryptocurrencies are inherently volatile and, if heavily weighted in your portfolio, can increase overall volatility.
Source: https://www.analyticsinsight.net/harnessing-cryptocurrencies-to-combat-the-inflation-threat/