Looming inflation and how to protect yourself from it
There are many ways to successfully hedge against inflation, one of which is to invest heavily in an asset class that has the potential to outperform the market during the time of inflation. Gold is a real world asset that is able to preserve its value for a long time. Bitcoin is fast becoming a perfect hedging instrument. With an annual return on investment of over 302%, Bitcoin seeks to eliminate the need for intermediaries in financial transactions, thereby speeding up payments and transfers between parties. The introduction of staking, yield farming, lending and borrowing to the crypto market, according to most experts.
After the outbreak of the new Corona virus pandemic, central banks had to resort to printing more money to save the dying economy. The US Central Bank, like others, is said to have printed more dollar banknotes to meet growing demand from the US economy.
As the deadly pandemic begins to recede and life returns to normal, events and expert opinions all point to looming inflation, with some speculating it could turn into hyperinflation.
Fortunately, there are a range of ways to successfully hedge against inflation, one of which is to invest heavily in an asset class that has the potential to outperform the market during the time of inflation.
How can you protect yourself against inflation
Apparently discovered in the Middle East before 6000 BCE, gold is considered a perfect hedging instrument. For the past two years, locals have seen it as an ideal substitute for their original currency, especially in countries where the value of the local currency depreciates exponentially.
A chemical element, gold is a real world asset capable of retaining its value over a long period. Currently selling at $ 1,783 an ounce, experts predict a revolutionary price spike before the end of 2025.
Offering a return on investment of 25% and more per year, gold as an asset class is a perfect fund hedging instrument against impending inflation.
Amid the Covid-19 pandemic, the real estate industry, according to a January 2021 Forbes article, gained more than $ 2.5 trillion in value in 2020 alone, driving the total US real estate market to $ 32.2 trillion.
With an annual return on investment of 10.5%, the real estate market is shaping up to be one of the largest markets and a perfect hedge alternative for investors.
With a current value of over $ 680 billion in market capitalization, Bitcoin is on its way to becoming a perfect hedging instrument. With a remarkable ROI, the 12-year-old phenomenon is considered one of the greatest financial revolutions of this century.
Like other investment opportunities, Bitcoin offers investors a hodl opportunity [hold] or trade their daily assets for profits. With an annual return on investment of over 302%, digital currency seeks to eliminate the need for intermediaries in financial transactions, thereby accelerating payments and transfers between parties.
Otherwise called DeFi, decentralized finance, one of the biggest trends in the crypto space has opened up limitless opportunities for investors to enter the market. The introduction of staking, yield farming, lending and borrowing into the crypto market, according to most experts, is a boon not only for investors but for the industry.
The influx of various projects ensures that investors get competitive interest rates and APY [annual percentage yield] whenever they invest in one of the protocols.
With billions of dollars stuck in various DeFi protocols, as DeFi Pulse reports, investors now see this emerging trend as a perfect hedging alternative.
DeFi Staking Protocols
Uniswap is currently one of the very few DeFi protocols to impose a necessary change in the way investors are rewarded. A decentralized exchange like Twindex, Uniswap, through its many liquidity pools rewards users for locking in funds. Being a community governed protocol, users reserve the right to vote for or against upgrades over the network.
Twindex is another such DeFi project. Built on the Binance Smart Chain [BSC], decentralized exchange, and the DeFi protocol attempt to help investors maximize profits through a range of farming options. Compatible with a ton of wallets, Twindex, through the integration of various advanced protocols and BSC’s scalable network can usher in an era of higher annual percentage rate [APR] for investors looking to hedge against inflation.
The compound [COMP] project, another DeFi protocol leaning towards the loan. It facilitates a system where individuals, regardless of their location, can lend and borrow funds seamlessly. In addition to offering users a perfect passive source of income, this protocol is gradually strengthening its position as an ideal hedging instrument.
As the world gradually leans toward inflation, investors would need a ton of hedging alternatives to invest heavily in in order to avoid large-scale asset depreciation. This guide has mentioned some of the asset classes with the potential to outperform the economy.
Fortunately, the advent of decentralized finance and the protocols that accompany it have opened up more opportunities to abundant investors.
Disclaimer: Nothing in this article constitutes professional investment advice. Please do your own thorough research before making an investment decision.
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