Crypto investment is creating a buzz on the investment horizon, and bitcoin is the most popular investment option in today’s era. Bitcoin is leading the market due to its significant capitalization, infrastructure, decentralized features, and longest track record. As per the revolution investment thesis, the value of bitcoin is not dependent on the factors like government or the valuation of fiat currency. Bitcoin is value storage irrespective of the geographic location of the holder. However, it can still be compared with macroeconomic parameters all over the globe, including in developed nations like the USA.
The idea behind this strategy is that its value will rise dramatically due to the fixed supply of bitcoin. However, in case of a rise in the supply of fiat currency, inflation will also show an upward trend. In the Covid-19 pandemic situation, it is observed that most the western countries, including the U.S., have pumped new fiat currency into the economy and dispersed it. As a consequence, now these countries are witnessing inflation.
Why does Bitcoin investment act as a hedge against inflation as a store of value?
If a country witnesses inflation of 5% per year, the $1 price of a commodity X at the start of the fiscal year will be $1.05. More fiat money will need to purchase the same commodity. Fiat currency kept in bank accounts earns meager returns, which is insufficient to match inflation. If funds are kept as bitcoin, the value appreciated would compensate for the rise in the commodity. Before introducing bitcoin in the financial market, investors used to hold gold.
Thus, we can conclude that holding bitcoin, in the long run, can solve the valuation issue that might arise due to inflation. While investment in bitcoin for short durations, consideration of factors like the risk profile of the investor, time horizon, and technical prowess is necessary. For individual clients, it is crucial to think about the bitcoin price volatility for a short-term duration. In today’s Russia – Ukraine war, cryptocurrency investment is emerging as a neutral alternative for receiving monetary aid in the circumstances of economic sanctions imposed on Russia.
Investment in crypto: Bitcoin or Ethereum
Bitcoin (BTC) and Ethereum (ETH) have gained popularity in the crypto space and contributed to this sector’s growth. The first cryptocurrency is Bitcoin, called digital gold or gold 2.0, whereas Ethereum introduced a decentralized ecosystem. Both have their uniqueness.
BTC is the first crypto not regulated by any central authority, created in 2009. Since then, it has been the best-performing mainstream investment. BTC’s performance is expected to continue in the long run with the rise in awareness about bitcoin investment. It is easier for investors to understand the pros and cons of investment in bitcoin due to the accessible information available about BTC.
Ethereum is the distributed blockchain network with native crypto ETH used for interaction and transactions with decentralized apps (Dapps) built on it. Dapps are the next-generation applications utilizing the advantages of blockchain. Leading global corporations like JP Morgan and Microsoft have started using Ethereum for their products, which will undoubtedly maintain Ethereum’s demand high in coming years.
Due to the adoption of blockchain technology, Ether transactions cannot be tracked by centralized financial systems like banks. Thus, it makes the Ether transactions secure and anonymous.
How is the Gaming industry changing with Web 3.0 and Blockchain?
In 2021, the gaming industry generated revenue close to $160 billion. This revenue model denotes the gaming industry dynamics from free-to-play games to play-to-earn games. One of the root causes of this change in the gaming industry lies in adopting web 3.0, allowing players to earn while enjoying the game. Players can buy and sell the assets in or outside these games.
Why is the popularity of the gaming industry increasing?
The maximum number of games have in-app purchases, which earn almost 50% of the revenue. With the adoption of blockchain technology, the ownership of in-game assets is secured, and web 3.0 ensures the finite supply of these assets in the ecosystem. On purchasing this in-game asset, asset ownership lies with the player and not with the game, thereby protecting the money and time of the players.
Another benefit is that players can monetize their gaming skills using web 3.0. The earning depends on the expertise of the players while playing. The players make their win in the form of crypto, which they can exchange for other crypto-assets or fiat currency. Blockchain-based games are interoperable, and users can switch between the games easily using their digital assets. Various digital assets are available, like NFTs in avatars, skins, and weapons that can be used in other games.
Final Thoughts: Web 3.0 and blockchain technology is changing the world in terms of investment option, risk hedging against inflation, gaming, etc. From a long-term investment perspective, investment in BTC and ETH are lucrative.
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