Luxolo Financial

Investors may be able to counter inflation with crypto

Luxolo’s services offer a whole new level of portfolio diversity with a personal touch.

Melissa Karns,
for Luxolo Financial
More and more investors are learning about the benefits of crypto-fueled diversification.

Inflation is as high as it has been in decades - 7.9% as of February 2022. This development is not only driving up the prices of everyday purchases, but eroding the real value of investments.

This marked time of uncertainty can be difficult to navigate without a trusted financial expert at your side. Like many, you might be trying to determine what investment will offer the best hedge against inflation. In simple terms, this is an investment that protects your money from losing its value during a time when prices are skyrocketing.

Unlike government-backed (or fiat) currency, such as the U.S. dollar, which can lose value over time or more rapidly due to inflation, cryptocurrencies, like Bitcoin, are by definition designed to yield zero inflation as discussed below.

But why are cryptocurrencies better able to withstand inflation than fiat currencies?

Unlike the U.S. dollar — which is not backed by any commodity (like gold or silver) when it is printed and often at a rate that’s more than consumers actually need — Bitcoin’s supply is fixed at 21 million bitcoins.

This is important.

Think back to those days in your first economics class, and the fundamental principle of supply and demand. As demand for bitcoin grows, and its supply does not, the dollar valuation of bitcoin will increase.

And this is predictable. That’s why now is the best time to get into the cryptocurrency market — not only because bitcoins are still undervalued — but because it’s one of the best ways to protect your money against inflation now and into the future.

Market volatility will always be something to look out for, and a crypto-inclusive portfolio can help defend against it.

Crypto vs. inflation

Investing in digital money is important now because those inflationary dollars you are investing in bonds, savings and money market accounts are lowering your purchasing power. Let’s face it, the price of gasoline isn’t the only thing to rise. Groceries, vehicles and various other necessary goods’ costs have increased due to inflation and supply chain issues spurred by the COVID-19 pandemic.

And while the U.S. dollar is gaining temporary strength due to geopolitical tensions, investing in crypto protects hard-earned wealth from the dollar’s diminishing value.

Cryptocurrencies, such as Bitcoin, Ethereum and more, provide investors with another choice — and an opportunity. And while not all cryptocurrencies have a maximum cap, like Bitcoin, most cryptocurrencies have mechanisms for controlling the circulating supply

Because cryptocurrencies are not controlled by any government, they cannot be manipulated by changing interest rates or a desire to simply print more – thus avoiding the pitfall of inflation. (After all, the massive increase in money supply has not stimulated GDP growth.) Again, the supply of bitcoins is limited and unchanging. This scarcity may prove key in a crypto victory against inflation.

These favorable factors all work together in concert to render cryptocurrencies, such as bitcoin, deflationary assets, meaning that over time they tend to experience increased purchasing power, all while preserving your financial sovereignty.

Luxolo Financial’s advisors are here to help you navigate the nuances of crypto, offering a customized level of personal service and support that those looking to invest in cryptocurrency won’t find elsewhere. And when it comes to the battle against inflation, it’s important to have this heavy hitter in your corner.

Crypto is easy to invest in, transfer and use. Because it is digital, all you need is access to the internet. Luxolo makes it even easier to buy with an in-person cryptocurrency exchange desk that helps investors buy with confidence. This signature service is included with each desk order and provides an orientation into the world of cryptocurrency and an invaluable, two-way discussion between you and a Luxolo expert.

One of Luxolo’s crypto-fluent advisors can tell you just how helpful Bitcoin and other currencies can be to your portfolio.

Crypto gaining respect

And while institutional investors still view cryptocurrencies as a risk-asset class, this is changing. Several national and state governments, such as those of El Salvador and the city of Lugano, Switzerland, recognize Bitcoin as a legal tender.

As more people convert more dollars into bitcoins, the dollar valuation increases. Known as the market capitalization of Bitcoin, this currently amounts to over $700 billion USD.

Cryptocurrencies play a key role in diversifying your investment strategy — especially in times of skyrocketing inflation. Investing in Bitcoin can provide an excellent complement to a traditional investment portfolio, and Luxolo’s advisors can personally walk you through the specific investment portfolios they’ve developed.

The finite number of bitcoins, coupled with the blockchain technology that is used to verify all crypto transactions, has an infinite future — not only fighting inflation in the long run, but changing our everyday financial transactions, some may argue, for the better.

Luxolo Financial takes a unique approach to digital asset management — meeting in-person — that spurs real-life conversations and advice about intangible cryptocurrencies. Book an appointment today.