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The spectre of inflation: How to protect our wealth

Updated: Sep 30, 2020

By definition, "Fiat money is a currency (a medium of exchange) established as money, often by government regulation, but that does not have intrinsic value (value independent of the nominal value, such as a precious metal might have). Fiat money does not have use value (inherent utility, such as a cow or beaver pelt might have), and has value only because a government maintains its value, or because parties engaging in exchange agree on its value". (source: Wikipedia).

That means the Central Banks can only do one thing: Print more money overtime, in order to stimulate inflation. By doing so, they technically push people to spend (dumb money) or invest (smart money). Let's make it clear, it's necessary to spend money in order to fulfill the needs of our daily lives. However, a certain percentage of our portfolio should be invested to help fight the inflation.

It's like a silent monster which eats our wealth. Take a look at the following chart, where you can see the purchasing power of the U.S. Dollar since 1913, date when the Federal Reserve was created. 1 Dollar kept in your bank account (from 1913 to 2013) would have valued $0.05 after 100 years.

So how to protect our wealth? Depending on some key factors such as age, location, risk appetite and many others, a part of your wealth could be invested, for example, in commodities (Gold, Silver..) and bitcoin.

Talking about the undisputed crypto market king, it is the representation of a deflationary medium of exchange, which is still in price discovery. There is a definite amount of bitcoin that will be mined, no more no less. Its value, if compared with a fiat currency, shows a price appreciation overtime.

Below an interesting comparison of what most of people believe about bitcoin vs. what is actually happening:

The chart is very self explanatory. Since bitcoin was created in 2009, it has shown a relentless force: The power of decentralization. And its creation has brung innovation in the cryptocurrency sector. In less than 10 years we've seen the smart contracts, the improvement of hardware wallets, many liquidity providers (exchanges) and last but not least, the decentralised finance (aka De.Fi.), the pure application of finance in the cryptosphere. I bet that central banks are looking at DeFi right now and are scared. With the rate of innovation right now, they are at least 10 years behind. In fact, they are so behind that they don't even know how far behind they really are.

Good riddance.


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