Are you dreading a trip to the supermarket because of how expensive things are? You are not alone. Inflation is at an all-time high and the price of everything is off the roof!
In this article, we will explain inflation, how it works, its impact on fiat currencies, and how to protect your money using crypto.
What is Inflation?
Inflation is the rate at which the prices of goods and services increase over time. Two factors usually determine it:
- An increase in the price of goods and services.
- A decrease in the purchasing power of a currency.
For example, when the food inflation rate in Nigeria rises from 15.18% to 21.83% between 2020 and 2021, people spend more to buy the same quantity of food. This is why the elderly constantly talk about how things were cheaper “back in the day”.
How does inflation start?
Inflation happens when there’s an increase in the amount of money circulating in a country as a result of the nation’s monetary policy.
A country’s government may print more money to fund its military, add to its annual budget, carry out a project, etc. For example, during the pandemic, governments around the world printed money to fund their Covid-19 stimulus packages.
In other words, it’s the government’s job to control it. But as much as they try, they aren’t always successful.
Can crypto protect?
Cryptocurrencies can protect you. Most cryptocurrencies are finite assets like Gold and stocks, which means they can’t be over-circulated.
Also, the government has no control over the value of cryptocurrencies. So, you won’t have to worry when your government comes up with financial policies that can lead to inflation.
However, crypto prices are volatile. It’s common for the price of a cryptocurrency to drop and rise continuously.
Crypto’s volatility has made some critics question its use case as a defence against inflation. That’s where stablecoins come in.
How stablecoins can protect you
Stablecoins are cryptocurrencies that are backed against a stable asset like gold, fiat, etc. In essence, their values are tied to the value of the assets they represent.
For example, 1 USDT has the same value as 1 USD. Making stablecoins the preferable choice if:
- You have your fears about crypto’s volatility.
- The stable asset a coin is tied to is more valuable than your local currency.
- You need unlimited access to your money.
The good thing is that you can buy USDT with your Naira from a cryptocurrency exchange like Quidax.
The benefits of Bitcoin’s fixed supply
As earlier stated, there are only 21 million BTC in existence. Currently, 90% of that number is already in circulation.
But Bitcoin works against inflation because of its fixed amount. And what this means is that:
- The demand for Bitcoin will always be more than its supply.
- The value of Bitcoin will increase as its demand also increases.
Fun fact: Bitcoin is also referred to as digital gold because it’s the best type of cryptocurrency to use against inflation. This way, you can buy bitcoin in Nigeria and not have to worry about losing your currency value due to inflation.
Inflation is the reason your favourite things cost more by the day. Unfortunately, with fiat, you have no control over inflation. Your money’s value can also drop significantly if your government makes bad financial decisions.
Interestingly, you can protect your money from inflation by investing in stablecoins like USDT in a crypto app or exchange instead of saving dollars in your bank account. Quidax makes buying and storing cryptocurrencies easy. All you need to do is sign up to get started.
You can also check out our crypto academy for a better understanding of the cryptocurrency world and how you can make the most of your journey.
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