Bitcoin has over the last few years been seen more and more as a potential inflation hedge – a role typically associated with commodities like gold. As the central banks of the world’s largest economies print money to deal with the current economic woes and rising inflation, more people are looking for other ways to preserve their assets. As a digital currency that is not controlled by any central authority and has a maximum of 21 million coins in circulation, it is a welcome relief to people tired of their governments devaluing their money. In the next five years, Bitcoin’s hedging properties against inflation may become even more apparent as more people and organizations invest in it for the long-term.
If you are among those who wish to know where the price of Bitcoins may be in the future, it will be helpful for you to look for a bitcoin price prediction. These predictions are based on current market conditions, macroeconomic indicators and the increasing adoption of Bitcoin as a store of value providing a glimpse of what could be in the future.
Why is Bitcoin a Good Hedge against Inflation?
To appreciate why Bitcoin is gradually being viewed as an inflation hedge, one needs to first look at what causes inflation and how other assets cope with it. Inflation is defined as the rise in the general price level in an economy over a period of time which is usually as a result of increase in the money supply. This is due to the fact that fiat currencies are constantly losing their value and people look for assets that can at least maintain or even increase their worth.
Conventional items such as gold and real estate property have also been used as a hedge against inflation owing to the fact that they are scarce and have inherent value. However, it has similarities with the above assets, but it has some advantages that we will discuss below. One major advantage of Bitcoin is that it has a total supply of 21 million coins which means that there is no central authority that can print more coins as they are being done with fiat currencies which devaluates them. Also, due to the fact that Bitcoin is not regulated and can be transferred across borders, it is a suitable instrument for those who seek to avoid eroding the value of their funds in inflationary economies.
Increasing Uptake of Bitcoin by Institutions as a Hedging Instrument
More so, institutional investors who have always been cautious with their investments are gradually embracing Bitcoin as an inflation hedge. Other innovative companies such as MicroStrategy, Tesla and Square have bought large amount of Bitcoin to hold as a reserve asset. This growing institutional interest has not only validated the stand of Bitcoin as a store of value but has also increased the demand thus the price appreciation of the coin.
With the continued increase in the inflation rate across the globe and WEB3 currently a work in progress, institutions will continue to diversify their portfolios using Bitcoin. All the major central banks including the U.S. Federal Reserve have resorted to various measures like quantitative easing in order to boost their economies during periods of recession. Although these measures can contribute to short term economic growth they also raise the risk of inflation. Therefore, by the year 2025, due to the same inflationary polices, many institutional investors may invest more into Bitcoin thus raising its price.
The Importance of Scarce in Bitcoin’s Inflation Hedge Appeal
Scarcity is one of the main advantages of Bitcoin. While fiat currencies can always be created anew, there is a finite number of Bitcoins that can be mined. To add to this, there is a finite number of Bitcoins that can be produced which is 21 million and this is due to the fact that the maker of the currency, Satoshi Nakamoto put this as a limit. This scarcity makes it quite challenging for Bitcoin to perform its role as an inflation hedge.
The more people and entities will try to preserve their assets from the effects of inflation, the higher the demand for Bitcoin while its supply is limited. This supply-demand environment may push Bitcoin’s price much higher by 2025. Numerous investors consider Bitcoin to be ‘digital gold’ and due to the limited supply of the cryptocurrency, it can be used as a store of value in an environment where fiat currencies are being printed.
What Could Bitcoin be Worth by 2025?
Based on its function as an inflation hedge, Bitcoin’s value is projected to rise significantly in the next few years. Some experts are already assuming that by the year 2025, Bitcoin is likely to hit new records, thanks to even more demand from investors, both institutional and individual. Certain predictions indicate that the Bitcoin price may hit $100,000, with some analysts’ expectations standing at even higher rates.
Therefore, a Bitcoin price prediction includes inflation rates, monetary policies, institutional interest, and macroeconomic conditions. With inflation rates still eating away at fiat currencies, Bitcoin’s deflation characteristics are only going to make it more appealing as a store of value.
Conclusion: Store Value Set to be Enhanced
Given the fact that the number of Bitcoins is limited, as well as the fact that it is not regulated by any single authority, bitcoin is an attractive asset as a inflation hedge amid the global monetary base expansion and active implementation of quantitative easing programs by the central banks. By 2025, the primary application of cryptocurrency as an instrument that helps its owners preserve their assets from the impact of inflation can lead to a sharp increase in the price, which will be interesting for both large investors and ordinary people. With the increasing concerns of inflation globally, the use of Bitcoin as a store of value is set to be enhanced, and this may put it in a vantage position in the world’s financial system.
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