The United States has just posted the most inflation in 30 years, and many are wondering what that means to them.
Most people think inflation is just a word used by portfolio managers, while others just know that is why they pay more for a loaf of bread from week to week. other, but what you don’t know is what inflation really means to you. – Yes you.
People don’t realize the profound effects inflation can have on your financial situation and how it can keep you from growing your wealth.
Inflation is described as the rate at which the price of a basket of goods and services increases over time. For most people, the direct personal cost that inflation imposes on their lives goes unnoticed. It is accepted as an inevitable part of modern life. This is something that cannot be resolved and therefore is not worth worrying about. The numbers tell a different story.
It’s worse than you think
In the United States, inflation now stands at 6.2%. In other words, the average cost of living in the United States has increased 6.2% in just one year. But a 6.2% increase isn’t that bad, is it?
Well, if you consider that this is more than 20 times the return you can expect on the average US savings account (0.3%), your outlook may start to change.
That’s right. Interest earned on money in a savings account (0.3%) will barely cover 1 / 20th of the increase in cost of living (6.2%) experienced by the average American. In other words, your money allows you to buy about 5.9% less than a year ago.
âNow I know 5.9% doesn’t sound like a lot, but if that rate were to hold up for 10 years, people would have lost about 75% of their purchasing power. Looking at this number, it’s easy to see why it’s getting harder and harder for people to achieve a level of financial stability, âsays Brett Hope Robertson, chief investment analyst at Revix, the crypto investment platform .
Unfortunately, even this is not the full measure of the impact of inflation. The rate of inflation you see in the media is calculated based on the cost of living. For people trying to build wealth by owning assets, that number is much higher.
For example, roughly 36% of all existing U.S. dollars were printed between January 2020 and now. In other words, if your money was not in an investment that generated at least 19% growth per year, your wealth in terms of what you could afford in January compared to today is diminished.
The realization of the full impact of inflation on personal wealth has prompted many people around the world to convert cash into assets that protect their wealth against inflation. While this is a smart move, it tends to trigger another kind of inflation called asset inflation.
Asset inflation refers to the increase in the price of an asset in one year.
Towards the end of March 2020, when the United States first hinted at their now notorious habit of printing money, a single action in Apple Inc would have cost you just $ 58. That same share today will cost you $ 150. A great example of asset inflation in action.
The cost of Apple shares is an extreme example, but it’s clear. These figures concern everyone. Whether you’re looking to buy a home, eat healthy, or just refuel your car, life gets expensive and your money just doesn’t follow suit.
âMy money is losing value every secondâ¦ How can I protect myself? “
Throughout history, investors have sought to protect their wealth in times of inflation by purchasing assets that would follow or beat inflation. Gold, stocks and housing have traditionally been the best options, depending on the level of inflation. These assets are known in the financial world as âinflation hedgesâ.
Inflation hedges – We know that inflation increases the value of the things you want to buy tomorrow. Therefore, tomorrow you will need more money to purchase these items than today. To solve this problem, you just need to use your money today to buy an asset that will increase in value at the same rate or more than inflation increases in other assets. This way, your wealth is protected or covered.
Are cryptocurrencies a new option for wealth protection?
Blockchain technology has heralded the rise of a whole new asset class.
The star child of cryptoassets as an inflation hedge is undoubtedly âdigital goldâ otherwise known as Bitcoin. The original cryptocurrency shares many of the same properties as gold in terms of its capacity to store wealth and protect against inflation.
Unlike the US dollar, which has seen its supply increase by over 36% since Covid, Bitcoin has a scheduled coin release that halves every four years. Therefore, not only is Bitcoin unable to print more coins when it wants, but less and less coins are released into the system over time, in stark contrast to the situation most currencies find themselves in. trustees.
Let’s take a look at how Bitcoin compares to traditional inflationary hedges since the United States started printing money. Would this really be a safer bet than gold, housing, or even stocks?
Not that the graph above needs a lot of explanation, but the answer is a definite yes.
As a standalone cryptocurrency, we can see that Bitcoin (+ 900%) outperformed the S&P 500 (+ 85%), the US Housing Index (25%) and Gold (+ 18%), respectively.
But there seems to be an even bigger winner: the Revix Top10 pack.
Just like the S & P500, the Revix Top10 Kit (+ 1.667%) offers investors diversified exposure to the top 10 cryptocurrencies measured by market capitalization. This includes equal exposure to Ethereum, Solana, Bitcoin, and many more.
âThis shows you that not only do cryptocurrencies follow inflation and traditional inflation hedges, but they make them appear intangible. Cryptocurrencies, such as Bitcoin, have helped many people fight against it. US money printing by owning an asset that has much higher returns than the US dollar printing rate, âsays Hope Robertson.
A revolutionary investment
For people tired of falling victim to inflation, cryptoassets represent an unprecedented opportunity. What other asset class offers the possibility of effectively protecting your wealth from inflation while investing in an alternative to the very system that drives this inflation?
Incredibly, despite the massive influence they have already had on the world, the most important technologies defining the crypto world are still in their infancy. The opportunity to become an early investor in the future of the next global financial system is always available to everyone.
Revix – No purchase fees on Revix Packs
Choosing which crypto technologies to support requires a time commitment that most workers simply cannot afford.
This is why Revix, a Cape Town-based crypto investment platform, has created its Crypto Bundle offerings. Revix’s bundles allow investors to instantly buy a diverse portfolio of the best crypto assets by market cap.
There is no easier way to use crypto to hedge against inflation while getting involved in the future of global financial systems.
Revix is backed by JSE-listed Sabvest and offers access to all individual cryptocurrencies and bundles mentioned in this article.