3 Key Ways That Bitcoin Could Save Your Bacon in a Pinch in 2025 and Beyond
Bitcoin(CRYPTO: BTC) is unique as an asset in a few key ways that could make it a safe haven in difficult economic circumstances. To the cryptocurrency’s boosters, these features are nothing new and are part of the core value proposition that argues for holding it forever.
But to everyone else, Bitcoin’s potential to save your bacon in tough times is probably under the radar, so let’s explore the topic a bit further.
The maximum number of bitcoins that can ever exist is 21 million, per the constraints of its protocol. And as of 2024, roughly 20 million of those coins had already been mined. The last million won’t be mined out for quite some time, but that’s not the point here.
What do you call a currency that’s impossible to create more of? A fitting term would be to call it inflation-proof. The same cannot be said of the currencies we depend on every day for spending, investing, and saving, like the dollar and the euro.
Indeed, the specter of global inflation has been one of the main factors affecting investors over the last few years, and it might not be done yet. Under a pessimistic yet ultimately conservative set of assumptions, it is possible to see global inflation accelerating once more, and for longer than the recent spate.
Governments, especially in the Western world, are taking on major commitments for defense and industrial investments, funding the green energy transition, and maintaining or even expanding social spending in the face of globally aging populations.
There is no guarantee that the preferred financial solution will be to issue more currency and drive higher rates of inflation, but it could happen. There is no ability to issue more Bitcoin; even if every other major currency is depreciating against it, the crypto will retain its value. If that happens, there won’t be many other places for investors to hide from inflation, so that’s why Bitcoin will be all the more valuable.
Note that such a scenario does not guarantee that the price of Bitcoin will remain stable, only that its price can’t be inflated such that its purchasing power decreases.
Early adopters may have held their coins directly on the blockchain, where they can interact with their wallets through software, but today many people hold Bitcoin in their investment or retirement accounts. That means forgoing one of the protective mechanisms that the cryptocurrency offers (which we’ll get into shortly), but it also confers a significant advantage that comes in handy when investors are under financial pressure.
Specifically, if you hold Bitcoin, it’s often possible to use it as collateral for borrowing in fiat currencies like the dollar. The more of it you hold, the greater borrowing power it will grant you. And if you’re suddenly in a bad financial situation, borrowing against your coins could enable you to get the immediate cash flow you need without actually selling anything and inflicting a tax burden by realizing capital gains.
It isn’t necessary to be in a pinch for this capability to come in handy. You can also borrow based on your Bitcoin holdings to attain other financial goals, like buying a home. Just remember that loans nearly always incur some interest and servicing expenses, even if you’re mainly borrowing from yourself in theory.
Though it probably isn’t the right solution for most investors, holding your Bitcoin directly on the blockchain, as mentioned earlier, is inherently a powerful position if you’re worried about your assets being expropriated by a government or other actor, legally or otherwise.
Setting aside the friction of working with the blockchain software interface, it’s simply very difficult to pry coins out of your possession if they’re stored in a wallet that you have full control of. In the absence of direct control over your wallet, hoovering out your funds would only be possible with the consent of the blockchain’s validators, who are myriad in number, highly decentralized, and generally scattered across many jurisdictions worldwide. Furthermore, it’s hard to imagine any one actor being able to influence or coerce those validators to cooperate with seizing funds from any wallet.
Most investors will never need to worry about any powerful player trying to seize their coins. Still, it’s worth appreciating that there’s a capability on the shelf in the highly unlikely event that you need it, especially because that capability is a feature that durably supports the value of Bitcoin.
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