Why Bitcoin is deflationary and Fiat is Inflationary

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4 years ago

Investors are always seeking for a safe haven to store their wealth and protect their assets, the nature of the safe haven depends on the needs of the investor but you can rest assured that every investor will be looking for a deflationary rather than an inflationary asset. A deflationary asset is one which increases in value over time whereas an inflationary asset is one which decreases in value over time. Fiat currency is currency which is backed by the government and nothing else just like the paper dollar. When traditional fiat currency decreases in value, it loses the purchasing power and as a result inflation occurs.

It is true that paper money is inflationary and as a result loses its purchasing power however Bitcoin in contrast is deflationary because it rare as its maximum supply is capped at only 21 million and the mining of the coins gets harder and harder over time as the supply increases. The king of cryptocurrency which was created in 2009 during the fallout of the financial crisis, it was designed to address the failures in the traditional system and today has made it as one of the top hedges against traditional currencies adopted all over the world.

The main reason behind the deflationary nature of Bitcoin is the simple rules of economics, supply and demand. It is clear even from the precious metals that the more rare an asset is, the higher the demand will become.

Links for more information in cryptocurrency

https://www.valr.com/invite/VAW9SEQP

https://www.binance.com/en/register?ref=S1FMJHYN

https://t.co/FRQPVCYnMg?amp=1

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