Inflation fears have taken over markets, with the consumer price index spiking by the most since the Great Recession. The price of essential commodities like lumber, copper, and steel have been soaring, placing massive outside pressure on the already shaky housing market.
Meanwhile, silver and gold, two important traditional inflation hedges, have been stuck in consolidation while capital flows into Bitcoin and crypto instead. These markets are also now pulling back, so how does today’s investor or trader prevent capital loss, make money, and fight inflation all at the same time?
Before we explain how to get fully prepared for the long battle against inflation ahead, we must first examine what inflation is.
Inflation is, in essence, the rate of decrease in buying power that occurs with fiat currencies as the overall money supply grows. At the root, this is little more than the aftereffect of supply and demand.
Basically, as the supply of money grows, demand for it declines. And because fiat currencies are so widely used, the effect of inflation usually creeps up very slowly at a rate of around 2%. But the recent pandemic, and the stimulus money that was printed out of thin air in order to support falling economies, has created the perfect environment for hyperinflation to run wild, and it has been.
It has allowed commodities or anything else with a limited, scarce supply to run to new all-time highs.
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Interestingly, as nearly any other asset with a scarce supply has rallied, gold and silver have barely moved. Gold, in fact, has lost value, while silver has barely moved a few dollars in months.
What is likely going on here is a massive accumulation phase, where so-called smart money investors have been loading up on these assets, all while less risk-averse investors focus on crypto, stocks, and everything else.
But precious metals are the gold standard of inflation protection for a reason. These safe haven assets are so scarce that when fiat currencies and the stock markets are falling, metals hold strong like the shining rocks they are.
When these two assets break out, the uptrend could be one for the history books – made worse by the collapse of fiat currencies and the current monetary system.
In 2020, Bitcoin earned itself the reputation of being digital gold. In the “race against inflation,” even the likes of Paul Tudor Jones chose Bitcoin to be the “fastest racehorse.” And it has been.
Bitcoin has outperformed gold handsomely, causing some of the recent downward pressure on the precious metal market. Crypto enthusiasts claim that metals are being demonetized by the likes of BTC and ETH, but because of their industrial uses, metals should always have a place in a protection-focused portfolio.
Why? Just look at the recent Bitcoin crash. The asset is already down more than 50% from the highs in less than one month. There is no rollercoaster ride with metals, only long-term growth. Bitcoin still has a lot more to go to prove itself as the inflation hedge it has the potential to be.
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COVID has forever profoundly disrupted markets and the money supply. With more dollars floating around, risk appetite went through the roof. But now that the tide is turning toward inflation fears, stock and crypto have already started to sell off, and things could get a lot worse.
Exposure to a diverse array of trading instruments that include both metals and crypto is one way to ensure all available opportunities are covered. Using PrimeXBT, you can trade gold with CFDs or go long or short on Bitcoin depending on the direction of the trend.
Capital is less at risk if positions are appropriately hedged, stop loss levels placed according to technical analysis, and more. All of this is possible with PrimeXBT, a one-stop-shop for all things trading and the perfect platform to build an inflation-fighting portfolio of assets.
Are you prepared for the potential hyperinflation that’s to come?
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