Bitcoin & Litecoin – Inflation Protection
Bitcoin and Litecoin as Protection Against Inflation
Looking to protect yourself against South Africa’s dreaded and ever-present inflation?
Gold and silver offer traditional protection against money printing. They are time tested and they work extremely well.
Like precious metals, the supply of Bitcoins and Litecoins is strictly limited. This has led to comparisons between gold and silver.
It is the scarcity and also the durability of both these assets that have lead some to refer to bitcoin as digital gold or gold 2.0.
For these reasons many South African’s are also looking to Bitcoin and Litecoin as another option to protect against inflation.
These asset bubbles were caused by central bank monetary stimulus (money printing) around the world. Bitcoin has no central controller, so it is immune to this type of inflation by mathematical design.
The Winklevoss twins, of Facebook investment fame, own their own many bitcoins and are starting a Bitcoin fund for investors. They recently stated that they thought Bitcoin offered a good option for hedging against inflation in countries such as Argentina or Zimbabwe, where inflation is a huge problem. These countries experience the rapid depreciation of their currencies every day. For this reason Argentina in particular is embracing Bitcoin.
The twins have also cited the deposit tax that shook financial markets in 2013 as a potential risk for other countries. Again, Bitcoin would be immune from such a problem. This is because bitcoins stay on your computer, not at a bank.
The tax was taken from people in Cyprus, without warning, straight from their bank accounts. It has led to some fear about storing money in banks, in case this could happen elsewhere.
The event sparked an international incident and a run on the banks. There is every possibility the world will face another financial catastrophe, which could lead to people seeking a save-haven asset like bitcoins and litecoins: which they control themselves and can not be inflated.
Regulation seems to be on its way, from various jurisdictions around the globe. It could come in the next six to 12 months. New York state has officially stated that they will be issuing special ‘Bit Licenses‘. They are taking applications now from financial companies who want to deal with Bitcoin and Litecoin assets in their operations. Bitcoin has been popular in places like China, where there are strong capital controls and centralised, powerful governments.