Prices of everyday things like food and gas have been rising enormously lately. Due to inflation, your money doesn’t buy as much as it used to. People are looking for ways to protect their savings, and some believe that cryptocurrencies might be a good solution.
Cryptocurrencies are decentralized and, in theory, should be immune to ordinary economic principles. However, cryptocurrency is prone to its own fluctuations too, prompting many to question whether crypto really is the answer.
How Cryptocurrencies Can Help with Inflation?
Cryptocurrencies like Bitcoin and Ethereum are often compared to digital gold. As they have a built-in limit to how much of them can be minted, this can make them better as a store of value than a means of exchange. For example, there will only ever be 21 million Bitcoins. This fact acts as a barrier against them ever becoming devalued the way a fiat currency can be if too much of it is printed.
However, analysts believe this makes cryptocurrencies, including both Bitcoin and altcoins, a good way to keep your money safe when inflation becomes too high. According to crypto expert Ben Beddow, finding the next 1000x crypto—a new, promising cryptocurrency that is projected to rise immensely in value—makes for an exciting opportunity for new investors. As the crypto market continues steaming ahead, experts believe many altcoins are due for a sustained bull run, making them a great investment for those who get in early.
These newer cryptocurrencies could provide people with a chance to make a lot of money in the future. In this sense, discovering the next big cryptocurrency could be an ideal way to deal with inflation. People in countries where inflation is a major issue, like Venezuela or Turkey, have begun using cryptocurrencies more as a solution to the economic depression they’re facing.
With fiat currencies losing value quickly, crypto is being used more to buy everyday items in order to save more on costs. Similar to the use of gift cards for specific stores, in this case, it’s digital money that is proving to be the store of value.
What Do Experts Say?
Some experts believe cryptocurrencies can help with inflation but also warn that they aren’t a perfect solution. Due to the issue of volatility that is inherent to cryptocurrency, their value can fluctuate wildly. This can be risky if you have all your savings stored in them.
According to recent news, the world economy is facing some big challenges right now. For example, the European Central Bank recently had to lower interest rates to help with slow economic growth. This has many people worried about what’s going to happen with their money with cryptocurrencies emerging as a major alternative in response.
Experts also point out that not everyone is familiar with how to use or store cryptocurrency safely. The harsh truth about crypto is that it’s easy to lose your money if you forget your password or get hacked, so it’s important to be careful. Even though it’s becoming easier to buy and trade cryptocurrencies, understanding how to use them wisely still represents a learning curve for many people.
What Are the Risks?
While cryptocurrencies might seem like a cool new way to protect your money, they have some serious downsides. For one, their prices can change a lot in a very short time. Imagine if the price of your favorite snack doubled one day and then dropped by half the next day—this is how the volatility of cryptocurrencies works in a nutshell.
Another issue is that governments are still figuring out how to regulate them. This means that the rules can change suddenly, making it harder to know if your money is safe. At the same time, since most major markets aren’t well-regulated yet, scams or people trying to cheat the system are also rife at the moment.
In the States, for example, much will depend on the outcome of the next Presidential election. For now, Trump has emerged as the pro-crypto candidate and stated that if elected, he will ensure there are very favorable regulations for crypto.
So, Can Crypto Help?
In the end, cryptocurrencies can be a way to deal with inflation but they’re not a perfect solution. They’re a bit like riding a roller coaster—exciting but unpredictable. It’s important to do your research and maybe think of them as just one part of a bigger plan for your money.
For now, keeping your savings in a variety of places—like regular money, stocks, and maybe a bit of cryptocurrency—might be the best way to protect yourself from rising prices. It’s also always smart to learn more about their intricacies before investing.
For younger people, it’s important to get the advice of experts or older people who know more about how they work before making any rash decisions. They can help you figure out what’s best for your situation. Understanding how money works and knowing your options will help you make better decisions in the future.