Bitcoin is a virtual currency that Satoshi Nakamoto created as an alternative to fiat currency. Satoshi created this digital currency as a response to the 2008 financial crisis. This digital currency presents many benefits, such as fast and real-time transactions with low to no transaction fees. 

On the other hand, this digital currency has a hard limit cap meaning that only 21 million Bitcoins will ever be available. In the meantime, miners have produced 19 million Bitcoins already, meaning that 2 million Bitcoins are in circulation. Due to the limited supply and scarcity, this digital currency does not suffer from inflation. Instead, it is a perfect hedge against inflation.

Inflation is a situation whereby the prices of goods and services increase. People's purchasing power decreases when the prices of goods and services increase. Consequently, more money is required to purchase a product than you would have used. Inflation is prevalent with fiat currency because the government can continue to print more money and release it to the public. A country's central bank controls inflation. You can improve your trading skills with crypto AI trading bot BitIQ

How a Hedge Against Inflation Works

A hedge against inflation appreciates despite the purchasing power of traditional currencies decreasing. Consequently, this digital currency is a perfect hedge against inflation because it still maintains its value even during inflation. So, if you invest in this virtual currency, you protect your investments from inflation. 

The main factor that makes this virtual currency a perfect hedge against inflation is its limited supply. Also, this digital money goes through a halving process whereby the reward of this electronic money reduces by half. During the halving process, the demand for this digital currency increases while its supply decreases, translating to a rise in the value of this virtual currency. 

With the limited supply of this virtual asset, demand increases, leading to a rise in the value of this virtual currency. So, you can say that this virtual currency is a perfect hedge against inflation compared to fiat currency.

Unlike traditional currencies, this digital money is easily portable. Regardless of your location, you can easily send and receive this digital currency to any part of the country. Moreover, this electronic money is readily accessible to anyone with access to the internet and a smartphone. In the end, the accessibility of this virtual money opens it up to the unbanked population in underdeveloped countries. 

This electronic currency is fungible, meaning users can exchange one Bitcoin for another without losing value. Also, this virtual currency has gained worldwide acceptance and mainstream adoption. Despite this digital currency value being extremely volatile, generally, it is a perfect hedge against inflation.

There are many major and minor reasons for inflation in an economy. However, most experts claim that Bitcoin can help people hedge against inflation. 

During the past year, however, real estate and gold were the main assets for protection against inflation. These assets increased or maintained their value during inflation. So, by investing in gold or real estate, you protect your savings from inflation hence not losing your investments. However, investors' interest in gold has declined steadily. Despite being a decent investment, especially for the long term, it does not offer the same benefits as before. More so, it isn't easy to transport and store gold. 

The Bottom Line

Generally, it is safe to say that this virtual currency is a good store of value since it is a perfect hedge against inflation. As a result, investing in this digital currency ensures that your savings do not diminish in value.