Inflation is already here to come, and there could hardly be any doubt about it. The world economy is flooded with money. The main reason for this indeed is the COVID-19 crisis. In critical times when fiat money loses its value, more and more people wonder where to invest their savings.
Sure, this is positive, considering the financial impact caused by the beginning of the pandemic. It is no wonder, however, why the prices of goods and services are going up.
Gold and Crypto as a Response to Inflation
The value of both financial assets rises more than the price of the consumer goods when compared in the long term. On the other hand, the value of fiat money decreases compared to all other financial assets. Thus, we consider that it is better to have your money invested rather than kept in a bank deposit, especially in times of higher inflation.
We can take Bitcoin as an example, as it is the first cryptocurrency and can be analyzed in the most prolonged period. It has the highest average return of investment from all other asset classes in the last decade – more than 200% yearly.
Moreover, both Gold and Bitcoin have very similar characteristics, only where the Bitcoin is superior in terms of deficiency, resources for storage, divisibility, and portability.
Best 5 Cryptocurrencies to Invest in times of inflation
Now that we have gone through why investing in Gold and crypto is reasonable in times of inflation (and not only), let’s look at one of the best cryptocurrencies to invest in 2021. Sure, there are plenty more. Our team analyzes the ones listed here.
Since our topic corresponds to inflation, we cannot neglect Bitcoin – the most widely spread crypto asset. As already mentioned, its characteristics are very similar to Gold. Moreover, its average overall value has increased 9 000 000 times from its start of 0.08$ to 61 000$ as of October 2021.
BTC currently holds nearly 50% of the overall market capitalization of cryptocurrencies. More and more investors add it to their portfolio, as it is considered a large value stock.
Some enterprises have begun to accept Bitcoin as a payment method. VISA has already processed Bitcoin transactions, and some big banks are starting to include BTC in their transaction offerings.
One of the significant drawbacks that we must point out is that there aren’t many investors that can afford to purchase a whole coin with its high market value. If you are not fond of purchasing partial shares of a coin, you should reconsider focusing on Bitcoin.
With this brief analysis, we consider Bitcoin as the safest and most recommended crypto investment in times of inflation.
The second virtual currency in terms of importance and popularity to come after Bitcoin is Etherium. Even in 2020, its market value increased by 460%.
Etherium differs from Bitcoin because it is not only a cryptocurrency. It is a network, which allows developers to create their cryptocurrencies using the Ether network. Its market value is indeed way lower than Bitcoin, but it is far higher than the other cryptocurrencies.
Of course, there are some risks when investing in Etherium.
Despite that it is a blockchain, transactions are processed through a “single transaction bar”. This means that when the network is overloaded, transactions could require more time to be processed.
In 2016 a hacking attack led to 60 million Ether dollars loss due to insufficiency in the currency wallet. Of course, the people behind Etherium made significant steps to improve the security of their currency.
Despite the risks, we consider that Etherium is an excellent long-term investment opportunity.
3. ADA Cardano(ADA)
Compared to Bitcoin and Etherium, the Cardano network has a smaller footprint. It makes it lighter in terms of the energy resources needed to complete a transaction, resulting in faster transactions and lower fees. ADA has 12.5 times lower transaction fees than BTC and 37.5 times lower transaction fees than ETH.
The network development includes ESG risks and opportunities, as stated.
Also, Dish Network recently announced its partnership with Cardano. The telecommunication giant will partner with Cardano to provide digital identity services for Dish customers.
Another important partnership is between Cardano and Fintech COTI. Its primary purpose is to provide bank accounts and VISA debits cards within the Cardano blockchain.
Risks & Drawbacks
All this is attractive to investors, but there are some risks as well.
Even with a better network, Cardano might not be able to compete with the more significant cryptocurrencies. Fewer users mean fewer developers as well. The drawback for investors is that they look for a higher percentage of acceptance. The network has huge plans, but there are doubts whether the platform will manage to accomplish them.
In 2019, Chainlink was frequently mentioned in the crypto news because the coin value was growing faster than many other cryptocurrencies, even Bitcoin. The tendency continued in 2020, with the coin increasing its market value up to 520%.
In 2021 Chainlink reached its overall record value, which speaks for this cryptocurrency’s legitimacy, acceptance, and potential.
Many big companies, such as Google, showed interest in LINK, making it one of the most attractive for gaining trust and investments.
Risks & Drawbacks
As with ADA Cardano, Chainlink has a smaller volume and market capitalization than the more attractive cryptocurrencies. Nevertheless, Chainlink’s potential seems limitless, and many of the best DeFi applications use it on their platforms.
Polkadot was created by some of the leaders of Etherium, who separated to create their cryptocurrency with a better network. Despite having a “single transaction bar” for processing transactions, like ETH, DOT has multiple.This coin is designed to filter and reward real investors, not those who aim to earn some money quickly. Those who hold their coins even have the right to vote for network features such as fees, upgrades, etc.
Risks & Drawbacks
As released in 2016, the coin is still very young. It does not have a track record long enough to be analyzed.
There is no doubt; crypto is here to stay. This article has tried to provide an objective analysis of both stable and risky crypto investments to battle inflation. As the number of cryptocurrencies is growing exponentially, choosing which investment is good becomes harder and harder. While you pick the ones that are suitable for you, we suggest you consider these general bits of advice:
– Diversify your portfolio, or as the old saying says, “Do not put all your eggs in one basket.”
– Check the transaction processing speed of a given crypto
– Compare the transaction fees of the coins you analyze
– Check the options a given coin to be used for regular purchases and bank transfers
We also advise looking at cryptocurrencies as a long-term investment rather than as a get-rich-quick option.