Bitcoin has always been termed to be an inflation hedge by enthusiasts. However, seeing the current market fluctuation, it’s evident that we are not there yet. But Bitcoin definitely has the potential to become an inflation hedge as it is easy to access and has a fixed supply. The primary USP of Bitcoin is its 21 million limit and use cases which makes it an asset. However, the crypto market has become quite correlated with other assets, and it has hardly given any returns in the past 6-8 months.
Bitcoin as an inflation hedge
Inflation primarily occurs when the government prints a lot of money, leading to more supply and prices going up. That is what happened in 2020 and 2021, which led to the US hitting a 40-year high inflation rate. However, Bitcoin doesn’t have this problem as its supply is limited, and the mining of new tokens is also very slow. It has already hit 20 million supply of Bitcoin, and the last 1 million will take more than 100 years to be mined.
So, based on the current adoption and increasing demand for Bitcoin, it is clear that the finite supply makes it an asset. There are no central authorities controlling it, which ensures any interference with its design. But we will still have to wait for more adoption and use cases so that its volatility trims down a little bit. At the same time, we still have a long way to go in terms of decentralization.
Currently, Bitcoin mining may not be completely controlled by some authority or group. But the majority of its hash rate is controlled by a few mining companies and pools, which is a problem. This is why we gotta wait till mining becomes easier and it becomes a common thing among households.
Future
As more adoption happens and Bitcoin’s holdings and mining get more decentralized, we can expect it to behave more as an inflation hedge. Currently, there is just too much volatility and a lack of trust in the market. We also need to wait for this recession phase to pass and have more regulatory clarity on cryptocurrencies.
Do you think Bitcoin has the potential to become an inflation hedge? And how long will it take for that to happen? Let us know in the comments below. And, if you found our content informative, share it with your friends.
Also Read: Binance partners with South Korean city to boost crypto adoption.