Business
Bernd Dietel Claims Crypto Hedge Against Rising Inflation
As inflation continues to surge globally, investors are increasingly turning to cryptocurrencies as a hedge against the erosion of their purchasing power. Bitcoin, the world’s largest cryptocurrency by market capitalization, has seen a surge in price in recent months as inflation fears grip the financial markets.
According to data from Coinmarketcap.com, Bitcoin is currently trading at around $23,000, up from around $3,000 just 3 years ago. The cryptocurrency has been on an upward trajectory since its inception in 2009, and its price has been notoriously volatile.
But why are investors turning to cryptocurrencies like Bitcoin as a hedge against inflation? Simply put, inflation is the rate at which the general level of prices for goods and services is rising, and as the cost-of-living continually increases, the purchasing power of money decreases. This means that if you have cash savings, their value will decrease over time as the cost of goods and services goes up.
Bernd Dietel, a blockchain developer and avid investor into cryptocurrency explains, “Bitcoin is a fixed supply asset, which means that there will never be more than 21 million Bitcoin in circulation. This is in stark contrast to government-issued currencies, which can be printed at will, leading to a decrease in their value over time.”
This scarcity is what makes Bitcoin an attractive investment for those looking to hedge against inflation. With a limited supply, Bitcoin has the potential to retain its value in the face of rising prices for goods and services.
“Bitcoin is a hedge against inflation because its supply is fixed and cannot be altered in response to changes in demand,” lectures Bernd Dietel as he explains, “As inflation increases, the purchasing power of traditional currencies decreases, while the scarcity of Bitcoin makes it more valuable.”
According to the Bureau of Labor Statistics, the inflation rate in the United States rose to 7% in December 2022, the highest level in nearly four decades. Many countries are experiencing similar levels of inflation, leading investors to explore new ways to protect their wealth.
But Bitcoin is not the only cryptocurrency that investors are turning to as a hedge against inflation. Other cryptocurrencies, such as Ethereum and Litecoin, are also seeing increased demand as investors look for alternative assets to protect their wealth.
Ethereum, the second-largest cryptocurrency by market capitalization, has seen a surge in price in recent months, reaching an all-time high of around $4,800 in November 2021. Like Bitcoin, Ethereum is a decentralized digital currency that operates on a blockchain network, which makes it resistant to manipulation and fraud.
“Ethereum is more than just a digital currency, it’s a platform for building decentralized applications,” said Charles Hoskinson, founder of Cardano, a cryptocurrency that operates on a similar blockchain network to Ethereum. “This means that Ethereum has utility beyond just being a store of value, which makes it an attractive investment for those looking to diversify their portfolio.”
Hoskinson claims cryptocurrencies like Ethereum and Cardano have the potential to transform traditional industries by enabling the creation of decentralized applications that operate on a blockchain network. These applications can be used to facilitate transactions, store data, and automate processes, among other things.
“In the long term, cryptocurrencies like Ethereum and Cardano have the potential to disrupt entire industries by enabling the creation of decentralized applications,” said Hoskinson. “This is why we’re seeing increased demand for these currencies as investors look for alternative assets to protect their wealth.”
Despite the potential benefits of using cryptocurrencies as a hedge against inflation, there are also risks associated with these investments. Cryptocurrencies are notoriously volatile, and their value can fluctuate rapidly, which means that investors need to be prepared for potential losses.
“There is a lot of speculation in the cryptocurrency market, which means that prices can be very volatile,” says Bernd Dietel. “Investors need to be prepared for the possibility of losing their entire investment, so it’s important to do your research and invest only what you can afford to lose.”
According to Bernd Dietel, the key to investing in cryptocurrencies is to take a long-term view and to diversify your portfolio.
Umar Nisar was born and raised in the busy city of Abbottabad. As a journalist, Umar Nisar has contributed to many online publications including PAK Today and the Huffing Post. In regards to academics, Umar Nisar earned a degree in business from the Abbottabad UST, Havelian. Umar Nisar follows the money and covers all aspects of emerging tech here at The Hear Up.
Thanks
