Three Crucial Methods that Bitcoin might Safeguard Your Predicament in a Crisis from 2025 and onward
Bitcoin, abbreviated as BTC (currently 3.61% growth), stands out as a unique asset due to its potential role as a savior in challenging economic situations. Bitcoinners, the crypto's staunch advocates, have long believed in these distinctive qualities that uphold Bitcoin's enduring value proposition. However, for the uninitiated, the prospect of Bitcoin acting as a shield in hard times might be an overlooked aspect.
Let's delve deeper into this topic.
1. Resilience Towards Global Inflation
Bitcoin's finite nature makes it a formidable contender against inflation, a demon causing worry among investors these days. Based on its protocol, Bitcoins' maximum count is capped at 21 million, with approximately 20 million already mined by 2024. The remaining one million will be a gradual process, not the primary focus here, but it highlights Bitcoin's inflation-resistant property.
Currencies that are routinely used for everyday transactions, like the dollar and the euro, cannot claim the same boast. Global inflation has been a significant concern in the last few years, and its persistence may not be over just yet. Governments in the western world are taking on substantial commitments, such as defense, industrial investments, and climate transition funding, under a presumably inflation-inducing financial approach.
If certain assumptions materialize, global inflation could accelerate and persist for a longer duration than observed recently. The challenge here is that governments might resort to issuing more currency to cope with economic demands, resulting in escalating inflation rates. Bitcoin offers a contrasting narrative. Since its limited supply is irreversible, its value persists even if other currencies erode, making it an attractive haven for investors in search of shelter from inflation.
It is important to note that while Bitcoin's value is resistant to inflation, the fluctuation in its price doesn't guarantee stability. The purchasing power of Bitcoin remains intact, as per this scenario.
2. Flexibility in Lending
In the early stages of Bitcoin adoption, users often held their coins directly on the blockchain using software wallets. Now, however, many savers store Bitcoin in investment accounts, sometimes sacrificing certain protective features tied to the cryptocurrency. Yet, this approach offers a distinct advantage: Bitcoin functionality as collateral for borrowing in fiat currencies, like the dollar.
The more Bitcoin you hold, the more borrowing power you acquire. In times of financial pressure, using Bitcoin as collateral could enable you to access immediate cash without selling it. This financial maneuver may help avoid taxing capital gains, although remember that loans incur interest and additional expenses.
Besides, this borrowing mechanism is not limited to precarious situations. It can be employed to achieve other financial objectives, such as funding large purchases like a house.
3. Resistance to Expropriation
Though it's not a common circumstance, storing Bitcoin directly on the blockchain offers a robust layer of security. This method ensures that even in the unlikely event of government expropriation or other coercive actions, your coins remain safe.
While dealing with blockchain interfaces may be challenging and prohibitive, this method deterrents direct theft or simple hacking. If you have sovereignty over your wallet, it's almost impossible to seize your Bitcoins without your consent, even if powerful entities try.
The consensus of blockchain validators, widespread and highly decentralized, would be required to transfer your funds. With validators scattered globally and unfettered from any central authority's influence, it's highly unlikely any entity could influence them to seize funds without your consent.
These security features are valuable possessions, mostly unrequired by everyday investors. However, in exceptional circumstances, they can safeguard your wealth.
A caveat: while holding Bitcoin directly on the blockchain is preferred, most investors will not face such challenges, as they have no reason to be concerned about asset seizure.
Further Reading:
[1] "What is Bitcoin?" Bitcoin.org[2] "Backing the Buck with Gold: David J. Laidler Reviews Gerald Dumenil and Dominique Levy's The End of Bretton Woods and the Power of Gold" Review, National Review[3] "Why Bitcoin is a Threat to Governments" Forbes[4] "Why Firms are investing in Bitcoin" TechCrunch
- In the world of finance and investing, many individuals are exploring Bitcoin as a potential hedge against inflation. Given its finite supply of 21 million coins, with over 20 million already mined, Bitcoin's value is less susceptible to erosion caused by inflation.
- When it comes to money management, Bitcoin's property as collateral for borrowing in fiat currencies can provide an advantageous situation. By holding Bitcoin in investment accounts, individuals can leverage their holding to take out loans in dollars or other currencies, without having to sell their cryptocurrency directly.
