Between 1961 and 2021, the prices of everyday goods rose almost 97 times, according to Statistics SA. This means that a basket of goods and services that cost R100 in 1961 would cost almost R9,700 in 2021.
This corresponds to an inflation rate of around 8% per year. In other words, R100 in 1961 is worth about 67 cents today.
Fresh chicken cost 70 cents per kilogram in 1961 compared to R58 in 2020. A dozen large eggs was 34 cents in 1961 and is currently R38.
Most people view inflation as the prices of goods and services that become more expensive over time. From a different perspective, however, this means that currencies are depreciating compared to the same real goods and services. A chicken or a dozen large eggs are the same items today as they were in 1961 – they haven’t got any more valuable.
Bitcoin – a deflationary asset
Bitcoin has only been around since 2010 and prices in Rand are only available from 2013. If we take that basket of R100 from 1961 and inflate it 8% per year, the same basket costs around R5,000 in 2013, which is almost the equivalent of five Bitcoin at the time.
Today the same shopping cart would cost R9 700, but that’s only 0.06 bitcoin.
“This shows the remarkable deflationary power of Bitcoin,” said Sean Sanders, CEO of the Crypto Investment Platform Revix.
“This also shows why bitcoin and cryptocurrencies should be part of any portfolio, even if it is just a small component, as it has been shown to far outperform the rate of inflation and the general devaluation of not just the rand but of all fiat currencies . “
Sanders points out that the price of Bitcoin rose from R1,000 in March 2013 to its current level of R750,000 – a 750x increase in value over eight years.
The same deflationary effect can be seen when comparing Bitcoin with the US dollar and other currencies.
The US dollar has depreciated about 3.4% annually since the end of World War II. More technically, it means that $ 100 has lost an average of $ 3.40 in real purchase value each year. In fact, inflation has caused purchasing power to drop from $ 100 in 1947 to $ 7.45.
Bitcoin has grown by almost 200% annually since its inception, making it the fastest growing commodity of the last decade and arguably of all time. This remarkable growth is mainly due to the increasing adoption around the world and the fact that never more than 21 million Bitcoins are issued.
Programmatic “hard cap”
“If you compare the supply characteristics of Bitcoin to the USD, you have a programmatic cap on the number of Bitcoins that will ever be in circulation, and you also have a deflationary growth rate of new Bitcoins since Bitcoin’s rate of inflation is automatically halved every four years “Says Sanders.
“The USD, on the other hand, has no cap on the number of dollars that can be printed and the rate of money printing, ie the inflation rate of the USD, is at an all-time high. In fact, $ 9 trillion was printed in 2020. That’s 22% of all USD that was in circulation at the beginning of 2020.
“If you increase the number of rand, dollars or pounds in circulation without increasing the number of goods accordingly, you will get inflation.”
Sanders continues: “Currencies are becoming worthless and really worthless in the long run.
“This explains why companies like Tesla, MicroStrategy, Stone Bridge and Jack Dorsey’s payment company Square are investing part of their cash reserves in Bitcoin. You play the long game. “
If you look at the relative demand side of the equation, global demand for Bitcoin and other cryptocurrencies has grown exponentially compared to the USD or any other fiat currency. There are well over 100 million unique active Bitcoin wallets around the world, and the value of the total crypto market is now approaching 15% of the world’s gold value, driving further adoption by blue-chip companies.
The risk of cash
At a recent conference organized by MicroStrategy CEO Michael Saylor to explain the logic behind Bitcoin as a store of value, several speakers highlighted the risk of holding cash over the long term.
“Cash is now a liability, it is no longer an asset. You are guaranteed to lose money every year if you hold cash. This has a profound impact on corporate balance sheets, ”said Ross Stevens, CEO of Stone Bridge, which has been converting cash to bitcoin since 2017.
“Learning Bitcoin is like learning a foreign language. I am thinking in Bitcoin now. Bitcoin is not volatile – fiat currencies like USD are volatile. Fiat currencies are getting cheaper and cheaper in Bitcoin terms, ”adds Sanders.
“The adoption of Bitcoin in companies is accelerating and we are only at the beginning of a trend that is expected to continue for several years. Bitcoin is now widely viewed as a secure store of value and is often referred to as digital gold. You can see the impact this strategy of converting cash reserves to Bitcoin had on Tesla, Square, and MicroStrategy stock prices. Many people buy these stocks as a proxy for Bitcoin.
“The next big trend that companies need to look out for when looking for better ways to preserve asset value is corporate investment in Ethereum, which is the second largest cryptocurrency by market capitalization. I expect we’ll see some announcements later this year that companies are moving some of their treasury assets to Ethereum. “
How to invest
If you work in an established, reputable crypto investment platform like Revix, backed by Sabvest, you can invest in both Bitcoin and Ethereum’s native Ether token with ease. Revix was introduced to make it safe and easy to invest in cryptos like Bitcoin and Ethereum, and to gain access to pre-made baskets of cryptocurrencies, which they refer to as “bundles” for just R500, through its investment platform. Revix does not charge any sign-up, monthly account or subscription fees, but a simple 1% transaction fee for purchases and sales.
The Top 10 bundle The investment available through Revix spreads your investment evenly across the 10 largest cryptocurrencies, which in terms of market capitalization cover approximately 85% of the crypto market, each with a weight of 10%. By default, you buy the 10 greatest success stories in the crypto room. The weights are adjusted monthly to ensure that no crypto exceeds a weight of 10%. This can be a huge benefit as other components of the bundle (such as Ether, Chainlink, Cardano, and Polkadot) have outpaced Bitcoin’s staggering increase by more than 300% over the past year.
The Smart Contract Bundle Tracks the cryptocurrencies that enable smart contract functionality and includes several cryptocurrencies that aim to challenge the dominance of Ethereum smart contracts.
The Smart Contract Bundle Tracks the cryptocurrencies that enable smart contract functionality and includes several cryptocurrencies that aim to challenge Ethereum’s smart contract dominance. Smart contracts use the blockchain to enable peer-to-peer transactions without the need for third party verification. This bundle contains cryptocurrencies that developers can use to create applications on their blockchains, much like developers create mobile apps on Apple’s iOS mobile operating system. The cryptos in this bundle include Ethereum, Cardano, Tron, Neo, and EOS.
Revix also offers one Payment package, This provides exposure to the top five payment-centric cryptocurrencies looking to compete with government-issued fiat currencies to make digital payments cheaper, faster, and more global. These cryptos include Bitcoin (BTC), Ripple (XRP), Litecoin (LTC), Bitcoin Cash (BCH), and Stellar (XLM).
You can also buy and sell USDC (a “stablecoin” backed entirely by the US dollar) and a physical gold token called PAX Gold, which allows legal ownership of an ounce of gold through Revix’s online platform.
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See Revix for more information.
This article is for informational purposes only. The views expressed are and should not be construed as investment advice or recommendation. This article is neither an offer nor the solicitation of an offer to buy or sell any of the assets or securities mentioned here. You shouldn’t be investing more than you can afford to lose. Before investing, please consider your experience and investment goals and seek advice from an independent financial advisor if necessary.