What's in this article
Gold as a hedge against inflation
During past inflationary periods, gold has exhibited a mixed track record. Earlier in the 1980s, there were periods when holding gold gave negative returns to owners.
However in recent times, gold has slowly lost its shine as a hedge. During the pandemic and even when waves have declined, people are showing less interest in gold. It is still viewed as good enough for holding value in the long term, but for the short term, the metal is seen as less desirable now.
Real estate as a hedge against inflation
The popping of the U.S. housing bubble underlined that real estate couldn’t always be trusted as a barricade against inflation.
For a long time, real estate has been regarded as an effective hedge against inflation. This myth, however, was shattered in the United States housing bubble. In March 2007, home sales and prices in the country suffered from a crash. As National Association of Realtors (NAR) data reveals, sales dropped 13% to 482,000 from the peak of 554,000 in March 2006.
In America and around the world, real estate prices are closely linked with factors like government policy, the political and economic stability of the country, local demographics, economy, geographical location, and infrastructure, amongst others. Guidelines and factors are simply too many for a regular person to understand.
Bitcoin As a Hedge
As an asset, Bitcoin works amazingly well against inflation and beats it by a surplus, although one should be mindful of external factors like the regulatory environment. Statistics show or prove that the odds are much safer while storing value in Bitcoin than assets like gold, real estate, stocks, and others.
Bitcoin is an effective barricade against inflation, due to its limited supply and decentralized technology. These factors breed scarcity and persistent power and relevance.
Pre-set limits on Bitcoin in circulation mean no excess supply, keeping inflation in check. Moreover, the digital coin’s annual rate of mining dips by 50% roughly every four years. Taking into account the current supply schedule, Bitcoin’s annual rate of production will be approximately half of gold’s, and this figure will continue to go down, making it more scarce than the metal, which will consequently drive up its value.