How does Bitcoin protect people from inflation?

[Tungbulu]

That's a fair point, and it's justified economically. Ideally, all good investments are supposed to shield people from inflation, no matter how little. And in the case of Bitcoin, it did it well, but Bitcoin's price is now expensive. You can't compare how it would shield people who bought it at $50 against inflation with those people who bought it above $100,000. We should be realistic.

One thing that’s worth noting is that most investors ain’t actually buying all their bitcoin at once, and the $50k vs $100k comparison only really affects folks who literally went all in at the peak. If an investor has been or is gradually staking his sats every month for years, he’ll definitely end up with a blended entry that’ll potentially smoothen most of that out.

[Berry2d]

Bitcoin's market price can fall dramatically, even while inflation is high. Research and financial institutions have noted that Bitcoin's relationship with inflation is not strong enough to call it a reliable inflation hedge.

That's a fair point, and it's justified economically. Ideally, all good investments are supposed to shield people from inflation, no matter how little. And in the case of Bitcoin, it did it well, but Bitcoin's price is now expensive. You can't compare how it would shield people who bought it at $50 against inflation with those people who bought it above $100,000. We should be realistic.

Besides, renown authors like Benjamin Cowen, Michael Harris, etc had postulated the diminishing returns in Bitcoin, which is more feasible now, and would increase as the price grows. Some countries inflation is so bad to the point of 10x in 10 years or so, but let's just say 5x in 10 years. At current levels of about $80,000, do you think Bitcoin would be $800,000 in 10 years? If you say yes, then you are a dreamer.

Of a truth the way bitcoin will shade those that invested when bitcoin price was 50$ can not be the same as that of those who invested when it climbed to 100$ but the truth is,  from where ever it was met one most get that protection we seek.
The only difference both investors have is there time of investment and price from when their investment was done if not both are enjoying same protection because Bitcoin operates at flat rate to all without minding the level of investment anyone has.

It will be a dream come through if Bitcoin gets to $800,000 in ten years from now because that have been the dream of all investors presently now but am not sure if that can come to manifestation.

[Mahiyammahi]

I don't think Bitcoin can protect people from inflation because it's price is volatile and it can fall even when inflation is high

Actually, it depends. If you are comparing Bitcoin as a hedge of inflation, then you need to consider the time frame. If you are watching Bitcoin time frame in a short time frame, then you might made losses in Bitcoin. But on a larger time frame, it always hedges against fiat currency. Not only that, it has the opportunity to surge the price even more. And in every cycle, the Bitcoin is creating a new ATH. So even though the price is much volatile, but it has a option to go even higher than before.

[Cookdata]

Thank you for this topic, I am learning a lot. I am from Philippines where inflation is high and our peso loses value. From what I understand, Bitcoin protects from inflation because it has limited supply of 21 million, unlike peso that government can print. As a beginner, I am still learning how to properly store it safely. Do you think Bitcoin can really protect small earners like me who can only save small amount? Thanks for any guidance.

Fiat is a killer of fiat currency, many people don't know the consequences of inflation. I checked Philippines what was pesos to dollar 5 years ago, it was around 50 pesos to a dollar but today it's trading around 63 pesos, that means if you have been holding your pesos in your account in the last 5 years as savings, you have lost more than 20% of the original value in 5 years. If you compare the growth to what Bitcoin has done 5 years, you would have been able to retain the value of your money and increase it by quarter value. You country is fair, I don't know what to say about mine, it's terrible than it looks.

People don't know about inflation and how deep they have loss their values and investment. There are some people that has made investment in landed property that within the time range of 5 years, they are yet to get half of what Bitcoin would have given them. What makes Bitcoin even special is the fact that you can sell it any time, you can't do the same with other investments even if they protect you against inflation.

[Abuobyda218]

First, you need to understand how inflation is created, the economic situation of the country and the government are directly responsible for the creation of inflation. When the government prints excess paper money to solve the current problems, inflation is created. That is, the government tries to solve the current problems in the country by increasing the supply of all the currencies whose supply is unlimited at almost any time.
But if you look at Bitcoin, the total supply of Bitcoin is 21 million, that is, you cannot increase the supply of Bitcoin even if you want to. Where it is not possible to increase the supply, it is not possible to cause inflation in Bitcoin. That is, direct supply is one of the main regulators of inflation control, there is no fixed supply of paper money, therefore, the inflation of paper money cannot be controlled. But the supply of Bitcoin is limited to 21 million and since it is a fixed supply, there is no inflation.

[josscrypto]

From what I learned, Bitcoin protects from inflation because it has limited supply of 21 million unlike fiat that can be printed. But I think we still need to learn about volatility too. For me, I see it as long term hedge, not short term.

[Tank67]

From what I learned, Bitcoin protects from inflation because it has limited supply of 21 million unlike fiat that can be printed. But I think we still need to learn about volatility too. For me, I see it as long term hedge, not short term.

Not just bitcoin but everywhere investment as far as your money is been doubled which means you are making profit instead saving it in cash, because having multiple source can also be used to fight against inflation and that is the main issue when you have sources that is bringing money for you then that will be a very beautiful fight against inflation. The focused  should be how to make more money.

[UpTober]

There is no way to compare the two at the same time. You may have noticed that the value of your country's currency has decreased a lot compared to what it was before. Due to the decrease in the value of the currency, you now have to spend more money to buy a certain thing than before. Now, the decrease in the value of the currency has not changed, that is, the value of the currency has not improved, but if you look at the Bitcoin market, you will see that the Bitcoin market has been dumping, but its value has increased. Here, if the value of the local currency decreases, it is not recovering, but if the value of Bitcoin decreases, its value is likely to go to a higher level later. Hopefully, you understand how Bitcoin will protect your money from inflation.

[Decimetre]

From what I learned, Bitcoin protects from inflation because it has limited supply of 21 million unlike fiat that can be printed. But I think we still need to learn about volatility too. For me, I see it as long term hedge, not short term.

Not just bitcoin but everywhere investment as far as your money is been doubled which means you are making profit instead saving it in cash, because having multiple source can also be used to fight against inflation and that is the main issue when you have sources that is bringing money for you then that will be a very beautiful fight against inflation. The focused  should be how to make more money.

Making more money is not the true fight against inflation because you are only dancing to the tune of inflation instead of fighting inflation. Inflation means that you have to buy a particular item with bigger volume of money over time and this is just what you do when you try to make more money as a way to fight inflation. You get more money which will be valued at same amount as the least number.

Fighting inflation means that a given amount is able to buy same item or even more over time. Let's say for instance:

... James has $100 now that can get you say wristwatch today.
... Gideon has 0.000013 Bitcoin that can buy same wristwatch.

By 2030, same wristwatch will perhaps become $150.

If the two people saved the above amounts, it becomes certain that:

James is certain that he must have to do additional work to raise $50 (additional income) to make his money up to $150 to get the watch while Gideon's Bitcoin would perhaps be worth at about $170 dollars or less or more. He may buy same wristwatch with same amount of bitcoin 0.000013 bitcoin and still have a balance of $20 or it may be that his bitcoin is within $140 which means he's adding only $10 to make up his money. Perhaps, his bitcoin may be less than $100 (because nothing is fixed). But in most cases, over time, bitcoin has a positive trend which is how inflation lost its grip when you use bitcoin.

So this is not the same as looking for another source of income because you will only make more money that will get eroded again.

[Nothingtodo]

Bitcoin's market price can fall dramatically, even while inflation is high. Research and financial institutions have noted that Bitcoin's relationship with inflation is not strong enough to call it a reliable inflation hedge.

When a country is politically corrupt, the government is on the verge of bankruptcy due to corruption. At this moment, if the government prints extra money to deal with the situation, then inflation occurs due to that money. Since there is an unlimited supply of government-approved paper money, the government can print paper money whenever it feels the need, and if it prints more money than it needs, that extra money appears as inflation. And the supply of Bitcoin is not unlimited but limited, therefore Bitcoin is completely inflation-free. If someone accepts Bitcoin as a medium of transaction instead of paper money, then inflation will definitely not be affected here.

[Budicord]

There is no fixed limit on government-issued paper currency the government or the central bank can print new currency whenever they deem it necessary. Printing excess currency increases the money supply in the market, which in turn reduces the actual purchasing power or value of the currency this phenomenon is known as inflation. In the case of bitcoin central banks have no way to increase its supply or diminish its value at will. Bitcoin is entirely decentralized it is not controlled by any single government bank or financial institution bitcoin remains unaffected by inflation.

[Bitcoin Maxi]

First, you need to understand how inflation is created, the economic situation of the country and the government are directly responsible for the creation of inflation. When the government prints excess paper money to solve the current problems, inflation is created. That is, the government tries to solve the current problems in the country by increasing the supply of all the currencies whose supply is unlimited at almost any time.
But if you look at Bitcoin, the total supply of Bitcoin is 21 million, that is, you cannot increase the supply of Bitcoin even if you want to. Where it is not possible to increase the supply, it is not possible to cause inflation in Bitcoin. That is, direct supply is one of the main regulators of inflation control, there is no fixed supply of paper money, therefore, the inflation of paper money cannot be controlled. But the supply of Bitcoin is limited to 21 million and since it is a fixed supply, there is no inflation.

The government is responsible for creating inflation when they can not manage money very well like the way they have been doing and this deficiency is mostly caused by the change in government especially when corrupt leader take over the government and does not know how to manage money. Where Bitcoin can help in terms of inflation is in it price. The price can go up which can add crazy interest to your portfolio if you have reasonable holding. Buying Bitcoin five years ago is completely different from what you will be buying If the price were to be the same.

[Brizi5000]

Bitcoin's market price can fall dramatically, even while inflation is high. Research and financial institutions have noted that Bitcoin's relationship with inflation is not strong enough to call it a reliable inflation hedge.

When a country is politically corrupt, the government is on the verge of bankruptcy due to corruption. At this moment, if the government prints extra money to deal with the situation, then inflation occurs due to that money. Since there is an unlimited supply of government-approved paper money, the government can print paper money whenever it feels the need, and if it prints more money than it needs, that extra money appears as inflation. And the supply of Bitcoin is not unlimited but limited, therefore Bitcoin is completely inflation-free. If someone accepts Bitcoin as a medium of transaction instead of paper money, then inflation will definitely not be affected here.

In line with most governmental policies and corrupt practices which might affect and devalues local fiat, it cannot affect bitcoin because they have no control of bitcoin and how it should move, local currency failure will not affect the value of bitcoin and that is why bitcoin is seen as hedge against inflation. If governments have the power to control bitcoin then it wouldn’t have been what it is today, central banks cannot print more bitcoin to add to its 21 million total supply trying to fix deficits in government budget and economic instability/crisis.

[Baki202]

Actually, it depends. If you are comparing Bitcoin as a hedge of inflation, then you need to consider the time frame. If you are watching Bitcoin time frame in a short time frame, then you might made losses in Bitcoin. But on a larger time frame, it always hedges against fiat currency. Not only that, it has the opportunity to surge the price even more. And in every cycle, the Bitcoin is creating a new ATH. So even though the price is much volatile, but it has a option to go even higher than before.

When you hold for a longer period of time, the longer you hold, the more profit you are able to make, and it is important that if you buy and you don't make a profit, then to me you don't have an edge against inflation. It is only done by those who have invested and have made a profit and have the right to say, "Yes, we are fighting against inflation. The mindset has to be clear that this is what will happen when you start to invest you will have to wait for a longer period in order for you to benefit.

It's a tool perfect for fighting inflation since it has the potential to increase, and that way we can be able to increase our money instead of just allowing everything to stay in your account in banks without proper usage, and then eventually it starts to lose its value.

[Rhow]

From what I learned, Bitcoin protects from inflation because it has limited supply of 21 million unlike fiat that can be printed. But I think we still need to learn about volatility too. For me, I see it as long term hedge, not short term.

There may be a good argument for long-term investing. But that doesn't mean that just holding it for the long term will guarantee you won't get inflation. Sure, I know that Bitcoin has a supply of 21 million and no government can print new Bitcoins if they want to. But with traditional currencies, the central government does increase the supply, which is why many people might see Bitcoin as a hedge against inflation. But what I'm saying is that having a limited supply and holding it for the long term doesn't guarantee you won't get inflation.

 Let's say you bought $20,000 worth of Bitcoin. After a year, due to inflation, you need $22,000 to buy the same $20,000 worth of goods. But at the same time, the price of Bitcoin has also fallen much lower than your purchase price. In this case, even if you invest for the long term, you are not protected from inflation. Therefore, you need to plan in such a way that you are not forced to sell Bitcoin when the market is low.

[Zigabel]

First, you need to understand how inflation is created, the economic situation of the country and the government are directly responsible for the creation of inflation. When the government prints excess paper money to solve the current problems, inflation is created. That is, the government tries to solve the current problems in the country by increasing the supply of all the currencies whose supply is unlimited at almost any time.
But if you look at Bitcoin, the total supply of Bitcoin is 21 million, that is, you cannot increase the supply of Bitcoin even if you want to. Where it is not possible to increase the supply, it is not possible to cause inflation in Bitcoin. That is, direct supply is one of the main regulators of inflation control, there is no fixed supply of paper money, therefore, the inflation of paper money cannot be controlled. But the supply of Bitcoin is limited to 21 million and since it is a fixed supply, there is no inflation.

The government is responsible for creating inflation when they can not manage money very well like the way they have been doing and this deficiency is mostly caused by the change in government especially when corrupt leader take over the government and does not know how to manage money. Where Bitcoin can help in terms of inflation is in it price. The price can go up which can add crazy interest to your portfolio if you have reasonable holding. Buying Bitcoin five years ago is completely different from what you will be buying If the price were to be the same.

This is why i do say very often that most times inflation is Artificial,  this is why Bitcoin has a greater advantage over fiat,  because with Bitcoin you don't have what I takes to influence it to that point as a single person or organisation or a government,  there's so much independence around it that literally every one holding a unit of Bitcoin has got absolute control over the amount of Bitcoin they have. If Bitcoin were not to be fixed in supply, at a time, it's possible it could have been influenced for more production just like its done with fiat and the chances will be there for it to be inflation prone since it can be reproduced over again.

[As-Soon-As]

In line with most governmental policies and corrupt practices which might affect and devalues local fiat, it cannot affect bitcoin because they have no control of bitcoin and how it should move, local currency failure will not affect the value of bitcoin and that is why bitcoin is seen as hedge against inflation. If governments have the power to control bitcoin then it wouldn’t have been what it is today, central banks cannot print more bitcoin to add to its 21 million total supply trying to fix deficits in government budget and economic instability/crisis.

It is natural that Bitcoin will help you in many ways, because this Bitcoin has been created with a touch of the future, which is most visible in the touch of modernity. You will notice that the more you move towards the future, the more Bitcoin will help you economically, not only here, Bitcoin will protect you from inflation. This is the biggest reason why people are no longer afraid to hold Bitcoin, because you can own as much Bitcoin as you hold Bitcoin with,
you can deposit it in your own wallet. Therefore, investing in Bitcoin is the most important thing in the current situation, because this Bitcoin plays the only best role against government authorities.

[WilliamCarter]

short term, btc price is proper volatile with market sentiment so you can't just treat it as some cosy safe-haven asset whenever you like. but looking at the big picture, government printing presses and fiat rotting away are the real silent killers eroding everyone's wealth, and that hard cap supply is what gives btc its actual edge against long-term inflation. if you wanna protect your stack over the long haul, rather than chasing short-term pumps and dumps, you're much better off getting your head around the supply cap and just diamond-handing it for the long run.

[Akaenyi]

Bitcoin's market price can fall dramatically, even while inflation is high. Research and financial institutions have noted that Bitcoin's relationship with inflation is not strong enough to call it a reliable inflation hedge.

When a country is politically corrupt, the government is on the verge of bankruptcy due to corruption. At this moment, if the government prints extra money to deal with the situation, then inflation occurs due to that money. Since there is an unlimited supply of government-approved paper money, the government can print paper money whenever it feels the need, and if it prints more money than it needs, that extra money appears as inflation. And the supply of Bitcoin is not unlimited but limited, therefore Bitcoin is completely inflation-free. If someone accepts Bitcoin as a medium of transaction instead of paper money, then inflation will definitely not be affected here.

Some analysts puts too much pressure on Bitcoin and they expect it to be performing extraordinarily in different aspects like being a total hedge against inflation, giving multiplied returns at giving time and if their expectations are not fully met they will bad-mouth Bitcoin. Bitcoin can protect people from inflation but it doesn't happen overnight because it is a volatile currency, for it to hedge against inflation effectively you have to hold it over a long period of time. Bitcoin is not the cause of inflation in any country, it is the government's ineffectiveness that causes inflation, they can decide to print as much money as they want to cushion the effect of inflation but in the end their economy will become worse off. Bitcoin is the opposite of traditional currencies, it has limited supply and if you hold it for a long time it's value would increase and that is where it becomes an edge over inflation.

[Futurexxx]

Bitcoin's market price can fall dramatically, even while inflation is high. Research and financial institutions have noted that Bitcoin's relationship with inflation is not strong enough to call it a reliable inflation hedge.

Bitcoin is an asset that appreciates in value overtime, so it's a perfect hedge against inflation. If you think that Bitcoin is not a good hedge against inflation, then I urge you to look at it price ten years back, how much it was then and how much it is now. I bet you that you will get to understand that even it growth and the returns makes it one of the best asset to invest your money in, if you really want to make good money in this digital space.