What is Inflation ?
One attribute that has made cryptocurrencies — particularly Bitcoin — so appealing to investors is the idea that they’re more resistant to inflation than fiat currencies like the Australian dollar.
But what is inflation?
Inflation is the process by which currencies lose value over time, causing prices of consumer goods to increase. Most economists believe that some level of inflation is beneficial for the economy. For instance, the Australian government, like many others, has printed more money than consumers actually need for decades. It’s the reason a meat pie that cost a few cents half a century ago now goes for several dollars.
Bitcoin, on the other hand, has generally increased in value much faster than the Australian dollar has lost value, going from virtually worthless in 2010 to finishing 2023 at $64,900. (Due to market volatility, Bitcoin has experienced dramatic spikes and declines, but the overall trend has been upward over time.) This has made Bitcoin an increasingly popular hedge against fiat-currency inflation.
The main way Bitcoin is designed to resist inflation is through its limited and known supply, with the creation of new bitcoin tapering off over time in a predictable manner. There will only ever be 21 million bitcoin, and every four years, the amount of bitcoin that is mined is reduced by half.
Superannuation
Why Consider Cryptocurrency for
Your Superannuation?
Superannuation savings need to outpace inflation to ensure a comfortable retirement. Traditional investments may not always keep up with rising prices, which is why more Australians are exploring alternative options like cryptocurrency.
Cryptocurrencies, particularly Bitcoin, offer a unique opportunity to hedge against inflation. Unlike fiat currencies such as the Australian dollar, Bitcoin's value has historically increased at a faster rate than inflation, making it an attractive addition to your superannuation portfolio.
Key Benefits
Key Benefits of Including Cryptocurrency
in Your Superannuation:
Cryptocurrencies, particularly Bitcoin, offer a unique opportunity to hedge against inflation. Unlike fiat currencies such as the Australian dollar, Bitcoin's value has historically increased at a faster rate than inflation, making it an attractive addition to your superannuation portfolio.
Inflation Resistance
Bitcoins limited supply and predictable release schedule potentially makes it less susceptible to inflation.
Diversification
Adding crypto can add diversification to a traditional investment portfolio, potentially enhancing returns and reducing overall risk.
Long-term Growth
Despite market volatility, Bitcoin has shown significant long-term growth, offering the potential for substantial returns.
Invest with Confidence on the National Australian Exchange (NAX)
For those looking to invest in cryptocurrencies, the National Australian Exchange (NAX) emphasizes user autonomy and underscores the importance of thorough research and seeking professional advice before making any investment decisions. With the potential for high volatility and significant risks, it's crucial for investors to understand the market dynamics and their personal risk tolerance.
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Risk Warning
Cryptocurrency trading involves significant risk and may result in the loss of invested capital. Users should carefully consider their risk tolerance and trade responsibly. It is important to note that the Australian cryptocurrency market can be highly volatile, and prices may fluctuate rapidly.
Regulatory Compliance
The National Australian Exchange (NAX) operates in compliance with applicable Australian laws and regulations, including those set by the Australian Securities and Investments Commission (ASIC). Users are responsible for understanding and adhering to the legal requirements in their respective jurisdictions. It is recommended that users stay informed about regulatory changes and updates that may affect their investments.
Data Security and Privacy
At NAX, we prioritize the security of user data and employ robust security measures to protect user information. However, users are advised to take necessary precautions to safeguard their accounts and personal information, including using strong passwords, enabling two-factor authentication, and regularly monitoring account activity.
Disclaimer
Bitcoin has potential as a long term inflation hedge due to its fixed supply and decentralized nature. However, the inherent volatility, regulatory uncertainties, and relatively short historical records compared to traditional hedges add a level of risk. Thus, a careful, well-researched approach and diversification are crucial when considering Bitcoin as part of a Long term inflation-hedging strategy.
