Introduction: Events, which have unfolded during the last four-odd months, have clearly demonstrated that the disastrous fallout of Coronavirus would shatter the global economy. There is a consensus on the fact that the Coronavirus is going to be the reason for the world to experience a depression worse than the Great Depression a century back.
How the world is going to restructure its economy and finances, provide food and livelihood to millions of unemployed people, increase expenditure on health and care facilities are some questions plaguing policy makers in different parts of the world.
In this article, we are going to look at why investors and financial analysts continue rallying behind Bitcoin as a credible hedge against Inflation. We are also going to look at other important historical hedges against inflation like Gold.
Why the world is going to experience its worst Inflation ever?
Every country around the world is going to find its balance sheets severely depleted. This is because the sheer size, scale and losses from the Coronavirus crisis is on a different level altogether.
No country, including the most powerful economy in the world, the USA, could allocate resources without offsetting its balance sheets.
All countries in the world are going to do just one thing- print more money and borrow more money from their central banks. This means that the more money there is in the economy, the lesser will be the value attached to a national currency.
This is going to reflect in almost all aspects of our economy. However, its effects are going to be most notable on food items and medicines. In order to explain inflation in an easy manner, consider the following-
‘Before the Coronavirus pandemic, you could buy one dozen apples for one dollar. Post the pandemic and in a heightened sense of inflation, you are going to buy the same one dozen apples for two dollars.’
Gold- the Historical hedge against Inflation
As we speak, gold is trading at more than 15% of its last year value. This goes to show that people and investors have already started buying gold assets as a safe hedge against rising inflation. Any time, money loses its value, assets like gold gain in value.
This is because they are a finite commodity and there supply is limited. If you are holding on to gold when currencies are losing value, you will have a safe hedge during the times of crisis. For a very long time, the gold standard of backing currencies kept us out of misery eve since the Great Depression.
However, the USA did away with the same in the 1970s and used the dollar for the oil prices payments. However, gold did not go away, and continued to enjoy a safe position as a hedge against faulty economic and monetary policies of the government and the lawmakers.
Can Bitcoin be the New Gold and a credible hedge against Inflation?
There have been many stories in the news regarding an industry leading investor speaking of Bitcoins in the same length as gold. However, Bitcoin still has a long way to go if there is a comparison with gold to be made.
The Bitcoin rally of March-April showed that the new kid on the block has a lot of financial promise. It was also a clear indication that investors are turning away from traditional stocks are betting bit on cryptocurrencies like Bitcoin.
The Crypto Exchanges and Trading Platforms on Bitcoin are experiencing heightened interests because of the Coronavirus pandemic. If you too wish to learn how to trade in Bitcoins, or are looking to invest in them as a hedge against the rising inflation levels, you can visit- profit bitcoin login.