{"id":488297,"date":"2022-08-27T23:48:14","date_gmt":"2022-08-27T20:48:14","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/crypto-will-become-an-inflation-hedge-just-not-yet\/"},"modified":"2022-08-27T23:48:14","modified_gmt":"2022-08-27T20:48:14","slug":"crypto-will-become-an-inflation-hedge-just-not-yet","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/crypto-will-become-an-inflation-hedge-just-not-yet\/","title":{"rendered":"# Crypto will become an inflation hedge \u2014 just not yet"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a242e9a38290\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a242e9a38290\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/crypto-will-become-an-inflation-hedge-just-not-yet\/#%E2%80%9D_Crypto_will_become_an_inflation_hedge_%E2%80%94_just_not_yet_%E2%80%9C\" >&#8221; Crypto will become an inflation hedge \u2014 just not yet &#8220;<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/crypto-will-become-an-inflation-hedge-just-not-yet\/#Crypto_could_be_a_hedge_but_it_comes_with_inconveniences\" >Crypto could be a hedge, but it comes with inconveniences<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/crypto-will-become-an-inflation-hedge-just-not-yet\/#These_are_technical_problems_that_have_solutions\" >These are technical problems that have solutions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/crypto-will-become-an-inflation-hedge-just-not-yet\/#Inflation_is_caused_by_a_lack_of_trust_%E2%80%94_something_crypto_still_needs\" >Inflation is caused by a lack of trust \u2014 something crypto still needs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/buradabiliyorum.com\/en\/crypto-will-become-an-inflation-hedge-just-not-yet\/#Crypto_as_an_inflation_hedge_is_possible_but_not_in_the_current_climate\" >Crypto as an inflation hedge is possible, but not in the current climate<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_Crypto_will_become_an_inflation_hedge_%E2%80%94_just_not_yet_%E2%80%9C\"><\/span>&#8221; Crypto will become an inflation hedge \u2014 just not yet &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<div class=\"post-content\" data-v-28d77a7a>In theory, Bitcoin (BTC) should serve as a hedge against inflation. It\u2019s easy to access, its supply is predictable, and central banks cannot arbitrarily manipulate it.<\/p>\n<p>However, investors aren\u2019t treating it that way. Instead, the cryptocurrency market is mirroring the stock market. Why is that? Let\u2019s dive into what prevents cryptocurrencies from acting as a hedge against inflation, and what needs to h<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>en to make them a hedge in the future.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Crypto_could_be_a_hedge_but_it_comes_with_inconveniences\"><\/span>Crypto could be a hedge, but it comes with inconveniences<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Cryptocurrencies present a unique solution, given their lack of a central governing bank. You can\u2019t lose trust in something that doesn\u2019t exist. Its supply is finite, so it naturally appreciates in value. People using a blockchain with proof-of-stake protocols can access their funds at any time, while continuously earning staking rewards on their current balance. This means that the actual value of annual percentage yield is tied to the economic activity on the chain via its treasury and staking reward distribution mechanics. Those properties seem to address the cause of inflation in the traditional monetary systems \u2014 but some roadblocks remain.<\/p>\n<p><em><strong>Related: Inflation got you down? 5 ways to accumulate crypto with little to no cost<\/strong><\/em><\/p>\n<p>For starters, let\u2019s examine the reasons why people invest in and hold cryptocurrencies. The majority of cryptocurrency holders see the <em>future<\/em> potential of those technologies, meaning some of their value is not <em>currently<\/em> present. They are speculative investments. Decentralization has been achieved by Bitcoin, but its exuberantly high energy costs remain unaddressed, and the majority of mining forces are still aggregated into a dozen mining pools. Ethereum has similar issues with energy consumption and mining pool centralization. Ethereum also has a security problem \u2014 more than $1.2 billion has already been <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/web.archive.org\/web\/20220827201201\/https:\/\/hacked.slowmist.io\/statistics\/?c=ETH&amp;d=2022\">stolen<\/a> on its blockchain this year.<\/p>\n<p>There\u2019s also the issue of decentralized exchanges, or DEXs, which are currently not as fit for use as centralized exchanges. The DEX with the highest transaction volume, Uniswap, offers inefficient pricing compared with a centralized exchange. A simple trade of $1 million in Tether (USDT) for USD Coin (USDC) would cost over $30,000 more in fees and slippage than when executed on a centralized exchange.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"These_are_technical_problems_that_have_solutions\"><\/span>These are technical problems that have solutions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Granted, these issues are being addressed. Several third-generation blockchains are tackling energy consumption and decentralization head-on. Privacy is improving. Crypto holders are beginning to accept that their wallets will always be fully traceable, which will prove enticing to new users who have previously been hesitant over blockchain\u2019s hypertransparency. Projects seeking to merge traditional finance\u2019s mathematical rigor with the native attributes of cryptocurrency are tackling the problem of DEX inefficiency.<\/p>\n<p><em><strong>Related: Ronin hackers transferred stolen funds from ETH to BTC and used sanctioned mixers<\/strong><\/em><\/p>\n<p>Mass adoption and integration need to happen before crypto can act as a bulwark against inflation. Crypto has characteristics of future value in an ecosystem that is currently struggling to establish its fundamentals. The crypto economy is still waiting for applications that will take full advantage of decentralization without sacrificing the quality and experience, which is especially important for widespread adoption. A payment system where each transaction costs $5 and the exchanged value is regularly lost will remain unfeasible.<\/p>\n<p>Until the top cryptocurrencies can be used efficiently for real-world payments and decentralized applications provide a similar level of utility as centralized systems,<strong> <\/strong>crypto will continue to be treated as a growth stock.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Inflation_is_caused_by_a_lack_of_trust_%E2%80%94_something_crypto_still_needs\"><\/span>Inflation is caused by a lack of trust \u2014 something crypto still needs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Inflation isn\u2019t caused by just printing more money, which is to say that the <em>presence <\/em>of an asset doesn\u2019t automatically cause its value to go down. Between September 2008 and November 2008, the number of billions of U.S. dollars in circulation <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/trip-and-travel\/\" data-internallinksmanager029f6b8e52c=\"10\" title=\"Trip &amp; Travel\" target=\"_blank\" rel=\"noopener\">trip<\/a>led, yet inflation went down.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-08\/39d44948-5868-46d4-a06d-412d8a021c90.jpg\"><\/figure>\n<p>Inflation has much more to do with public distrust of the central monetary system. This lack of confidence \u2014 combined with corporate price gouging, the upheaval caused by pandemic relief packages and significant supply chain disruptions (accelerated, in part, by the war in Ukraine) \u2014 has landed us in the current crisis. The big money-print of 2021 didn\u2019t cause inflation, but it magnified it.<\/p>\n<p><em><strong>Related:\u00a0Has US inflation peaked? 5 things to know<\/strong><\/em><\/p>\n<p>In terms of presence, the supply of funds alone is not an overly significant issue for a store-of-value currency. What is stored is not necessarily part of the circulating supply. Gold, for example, exists in large volumes in the form of jewelry, bullion and so on, but in much smaller volumes on the commodity market. A market that took into account all the mined gold on earth would have a totally different price. Because this jewelry and bullion are not traded on the market at all, they do not affect the supply-and-demand curve. The same applies to currency.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">Wow  Year on year inflation in Europe in July. <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/t.co\/VGWQ1OQOcB\">pic.twitter.com\/VGWQ1OQOcB<\/a><\/p>\n<p>\u2014 Arnaud Bertrand (@RnaudBertrand) <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/RnaudBertrand\/status\/1563421259228401665?ref_src=twsrc%5Etfw\">August 27, 2022<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>Inflation is the result of a loss of trust that an asset is able to store its value over a long period of time. Most goods in this world are finite, so every party aware of the raised supply but unsure of the monetary policy will automatically factor it into their prices. Inflation becomes a self-fulfilling prophecy.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Crypto_as_an_inflation_hedge_is_possible_but_not_in_the_current_climate\"><\/span>Crypto as an inflation hedge is possible, but not in the current climate<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Cryptocurrencies fail as an inflation hedge during times of high volatility and market uncertainty. That said, they <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a>ly excel in steady growth environments where they easily outperform the market and where the relatively small market capitalization compared with fiat currencies plays in their favor as a growth stock. Current solutions to the problem of usability aren\u2019t sustainable due to their speculation-based nature and low transaction volumes. The fall of financially unsound blockchains affects the entire ecosystem, which means that potential long-term solutions keep being derailed by scammers. <\/p>\n<p><em><strong>Related:\u00a0Is Bitcoin really a hedge against inflation?<\/strong><\/em><\/p>\n<p>The more responsible and diligent the crypto community becomes, the more every sound protocol will benefit, and crypto will become a genuine hedge against inflation. Because cryptocurrencies currently follow growth stock patterns, they act as a good hedge against inflation during periods of stable growth but fail during times of financial crisis. As cryptocurrencies evolve, they\u2019ll become an effective bulwark during these downturns too.<\/p>\n<p>These days, it\u2019s prudent to err on the side of caution when it comes to crypto investing during periods of market turmoil, and it would be unwise to use crypto as the only tool for shoring up investments against inflation. But this will shift as blockchain protocols continue to mature, and we\u2019ll see an increase in the adoption and stability of cryptocurrencies as inflation hedges. The tools are already in place.<\/p>\n<div>\n<div style=\"background: rgb(239, 239, 239); border: 1px solid rgb(204, 204, 204); padding: 10px;\"><strong>Jarek Hirniak<\/strong> is the founder and CEO of Generation Lambda and a certified quant with more than 20 years of software development experience. He spent six years working on trading systems at Citadel Securities and UBS, where he developed a <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/watch-movies-tv-seriess\/\" data-internallinksmanager029f6b8e52c=\"8\" title=\"Watch Movies &amp; TV Series\" target=\"_blank\" rel=\"noopener\">series<\/a> of novel trading systems and trading-related software platforms while leading multidisciplinary teams.<\/div>\n<\/div>\n<p><em>The opinions expressed are the author\u2019s alone and do not necessarily reflect the views of Cointelegraph. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice.<\/em><\/p>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/crypto-will-become-an-inflation-hedge-just-not-yet\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; Crypto will become an inflation hedge \u2014 just not yet &#8220; In theory, Bitcoin (BTC) should serve as a hedge against inflation. It\u2019s easy to access, its supply is predictable, and central banks cannot arbitrarily manipulate it. However, investors aren\u2019t treating it that way. Instead, the cryptocurrency market is mirroring the stock market. Why&#8230;<\/p>\n","protected":false},"author":1,"featured_media":488298,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDgvZTIwNTRkMjItNzc2NS00MzFlLThmOTgtNDFlZTgzNTU5NzBmLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74863,75159,76153,88323,87885,106277,74355,5069,70610,70551],"class_list":["post-488297","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-cryptocurrencies","tag-digital-currency","tag-dollar","tag-financial-systems","tag-hyperinflation","tag-virtual-currencies","tag-adoption","tag-economy","tag-finance","tag-inflation"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/488297","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=488297"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/488297\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/488298"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=488297"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=488297"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=488297"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}