Cryptocurrency could be seen as an asset that acts as a hedge against inflation. However, does the cryptocurrency itself have inflation, and what to do in this case?
All UN-recognised countries use some form of fiat currency as legal tender. El Salvador is currently the only country that uses cryptocurrency as a recognized legal tender. However, this small South American country uses the US dollar as a legal tender as well. Fiat currencies are the traditional currencies that we use daily, such as the US dollar or the EU euro. Traditionally, these currencies are inflationary, which reduces their “value” over time (every year you can buy fewer goods and services for the same amount).
Inflation is often set by a country's central bank. For example, in the US, the inflation rate is set by the Federal Reserve. Most central banks try to keep the annual inflation rate somewhere between 2-5%. For example, the Bank of England is trying to set an annual inflation rate of 2%.
The inflation rate in the country is influenced by many factors: the level of taxation, changes in interest rates, and changes in the money supply.
Bad policies of the country or various crises have a direct impact on the inflation rate, which in turn increases prices, reduces the income of the population, increases unemployment, etc.
Contrary to popular belief, Bitcoin is not deflationary. A currency becomes deflationary when the inflation rate falls below 0%. For example, in 2015, the Riksbank (Sweden's central bank) cut interest rates to -0.5%. This meant that in 2015 the Swedish krona was a deflationary currency.
Bitcoin currently has an annual inflation rate of 1.8% and has a lower inflation rate than all the country's fiat currencies (this depends on each country's economy, averaging 15-20% in 2022). However, considering the volatility of the cryptocurrency, in addition to protecting against inflation it could act as a source of passive income.
The trend of 2021-2022 is cloud mining - the same cryptocurrency mining, only on rented equipment. This is a simplified version that suits anyone who wants to protect their savings from inflation and even increase them. Such a process frees you from buying expensive equipment, setting up, monitoring around the clock, solving technical problems, etc. You enter into a contract with a large mining farm, it is enough to have the Internet and any device.
To minimize the risk of stumbling upon scammers, it is important to find out about the company before concluding a contract and choose a trusted site with a good reputation and reviews.
One example of a mining company is the SunMining service. The platform consists of professional miners and specialists in the field of cryptocurrencies. The company mines using solar energy. The site is made with maximum simplicity and convenience, and a large selection of contracts will impress any investor.
Firstly, you need to sign up on the site, familiarize yourself with the contracts, pay for the selected contract in BTC and start receiving crypto in your account. An important note - the more capacity you rent, the more profitable and faster mining is.
Moreover, the referral program deserves special attention: share the link with your friends and earn bonuses from each invited user.
This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Visit Benzinga's Crypto Homepage - 1,000,000+ depend on Benzinga Crypto every month