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- Inflation Hedge
Inflation Hedge
Inflation hedging is intended to protect the value of an investment against the decreased purchasing power of a currency, which typically results from inflation. Assets which are considered an inflation hedge are expected to maintain or increase their value overtime, especially in the case of significant inflation. Bitcoin is considered a strong inflationary hedge because it is scarce and gains value over time as inflation of the U.S dollar increases. Its fundamental scarcity and the lack of influence central authorities have over its value have caused investors and companies to flock to bitcoin as rapid money printing increases inflation.
For example, as the dollar loses value from the effects of inflation, bitcoin tends to become more expensive. Therefore, an owner of bitcoin is hedged against a depreciating dollar because the value of bitcoin will rise.
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