Inflation Hedges like Gold, Real Estate, are Effective, but Bitcoin, other Cryptos Emerging as Wealth Protectors: Report

The team at digital assets firm Kraken has released a new report on Inflation, which they refer to as the “insidious thief.”

As mentioned in a blog post by Kraken, the concept of inflation is “front and center again for many market participants, but not everyone is certain of what impact inflation will have on the crypto markets.”

As noted by the digital currency platform, many people have speculated for years that Bitcoin’s (BTC) “disinflationary nature” could be its “biggest boon” in the face of an inflated US dollar. As the global reserve currency, the US dollar is “uniquely tied to many international business transactions and investments,” Kraken explains while noting that if the dollar “does begin to feel inflationary effects, the costs of goods and services could begin to rise.”

As shared by the Kraken team:

“The latest economic data has provided newfound fears of not only rising inflation, but inflation trending higher than expected. We explore if many of the disinflationary theories around bitcoin will hold true.”

In order to assist market and industry participants with better understanding what inflation really means for the world economy and its impact on crypto-assets, Kraken Intelligence has released an extensive research report on this economic problem.

As explained by Kraken in its detailed report:

“Inflation is usually a direct result of central banks creating money faster than GDP
growth. However, this imbalance doesn’t always lead to inflation: money can enter
circulation without causing inflation. For example, increased investment enables
technical innovations that are generally deflationary (i.e., causes prices of goods and
services to fall); when businesses can produce goods and services at a lower cost and faster than consumers can demand them, prices fall. In other words, new money is not always frivolously spent. Some may save or pay down debt. Even though the money supply is greater than before, the velocity of money fell (i.e., the rate at which money is exchanged within an economy).”

The report further noted:

“Because of what seems to be government and central bank’s innate tendency to push inflation to detrimentally elevated levels, individuals have learned over time how to better store their wealth to protect themselves against abnormally high levels of inflation.”

Although assets such as gold, real estate, inflation-adjusted bonds, and certain stocks have proven to serve as useful hedges against negative effects of inflation, the rise of Bitcoin and crypto-assets has “some market participants questioning how to protect one’s wealth in today’s modern-day economy,” the report added.

As stated in the report from Kraken Intelligence, this gradual shift in belief and thinking is “evident by institutional investors, such as MicroStrategy’s Michael Saylor, Bridgewater’s Ray Dalio, and legendary investor Paul Tudor Jones, outright vocalizing support for bitcoin.”

You can check out the full report here.

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