The Risks And Rewards From Using Cryptocurrency As An Inflation Hedge

cryptocurrency

Diversifying your investments is always a good idea when you want to protect your assets. It’s especially important considering that it seems like inflation is about to become a problem. For a long time, people used to buy up some gold to use as a hedge against inflation so that their current dollars would end up being worth more later when inflation catches up.

These days, people are starting to look at cryptocurrency as a way to hedge against inflation but with some other benefits attached. Of course, there are also more risks involved when using Bitcoin or other cryptocurrencies.

In this article, I will go over some of the risks and rewards when using cryuptocurrency as a way to protect your assets.

Rewards

The most obvious reward when you invest in Bitcoin or other cryptocurrency is that it is gaining in value that far outpaces the inflation rate.

Bitcoin has gained in value in multiples never before seen in cryptocurrency. This means that if you put in some money that you should see some nice returns. Even beyond what you would see if you were to buy gold.

Even Ethereum is a good bet as it is the second most valuable cryptocurrency after Bitcoin. Nobody knows how much t will gain in value over the next few years, but even considering the crash in 2018, it is still on an upward trend from when it was introduced. As long as you don’t sell ETH when or if it does dip or crash then you should have gains later.

Another reward is liquidity. You can sell your cryptocurrency whenever you want and have cash in minutes. Of course, the same can be said for gold, but there has to be a buyer. Since you have potential buyers from all over the world, then selling it on an exchange is never going to take long.

This makes it much better than real estate in that regard as it can take months or even years to unload a property.

Risks

There is a risk with any type of investment. Even something as reliable as gold can prove to have its ups and downs and not always keep up with the rate of inflation.

That said, there is volatility in cryptocurrency that can be intimidating to many. There is a real risk that a crash or dip in value can happen when you were planning to cash out. Since these dips do happen frequently, you have to have a good plan on holding long term so you can avoid losing your initial investment besides any gains you may have made if it gained any value.

Even if you decide to hold onto it there is a chance that the loss in value may erase the whatever ground you had made up against the rate of inflation. It is risky, but many are going this route because of how quickly money can be made.

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