When it comes to the economy, inflation takes centre stage. It makes sense. Inflation is usually an indicator of people’s ability to protect their wealth. In Canada, the annual inflation rate increased to 3.6%, the highest level in a decade according to Statistics Canada, and in September of this year, Canada’s inflation rate was 4.1%.
With inflation on the rise, many Canadians are worried about their financial future and looking for the best ways to protect their money. You've probably heard people who recommend investing in gold to protect against inflation. While that is still good advie, others are now turning to Bitcoin as a possible hedge against inflation.
What is inflation – and is it good or bad?
To keep it simple, inflation is the general rise in prices. As prices rise, it becomes harder for you to pay for them.
For example, if you have $100 and inflation is 4% then it means you’re not able to pay for 4% of goods you’re used to paying for. Now, you can only afford to pay for 96% of the same goods. This is a phenomenon called “loss of purchasing power.”
Another way of thinking about it is imagining 4% of your savings being slashed off. It’s for this reason that inflation is often referred to as “hidden taxation.”
Part of the reason why Canadian inflation is rapidly growing is because of the government and Central bank printing unlimited amounts of money to help Canadians navigate through the pandemic. The problem is that more money means it’s worth less just like more avocados means they’re worth less.
Normally, inflation wouldn’t be a problem if people’s wages kept up. However, people’s salaries aren’t keeping up with the rate of inflation we’re seeing.
So in order to protect the value of their money, savvy investors are taking their hard-earned cash and investing them in assets that are protected against (hyper) inflation, like bitcoin.
What is Bitcoin?
Bitcoin is a cryptocurrency, or digital money, that was created in 2008. However, most people buy bitcoin as an investment asset because of its unique characteristics. Mainly, that no one can produce more bitcoin at will. There will only ever be 21 million bitcoin in existence.
It’s this scarcity that helps protect bitcoin against hyperinflation and the reason why more and more Canadians are buying bitcoin in Canada.
To add to that, bitcoin is a predictable asset. Every 10 minutes, there are new bitcoin that enter into circulation. Predictability in money (and predictability in its ability to sustain value over the long-run) is important because it helps with financial planning and thinking ahead to important life events, like retiring.
On the contrary, the issuance of the Canadian dollar is unpredictable. The government and bank can decide to speed up or drastically increase the volume of currency that enters our market, inevitably influencing the purchasing power of your savings.
Another reason why Canadians are buying bitcoin is because it’s been the best-performing asset of the decade with a 200% compound annual growth rate; out-performing gold, the S&P500 and real estate.
How to buy bitcoin in Canada
Netcoins makes it easy for Canadians to buy and sell cryptocurrencies, like bitcoin, ethereum, litecoin and more. Simply create an account, get verified and send Canadian dollars into your account via e-transfers. Once your accounts appear in your account dashboard, you can buy bitcoin (or any other cryptocurrency we offer).
If you’d like to dive deeper into understanding bitcoin, check out the Netcoins Crypto Academy for Beginners.