Last Updated on 8 mins by cryptoevent

When Bitcoin entered the global domain in 2009, it was dubbed an inflation hedge.

The need for inflation hedging stemmed from the uncertainty that central banks were pursuing unconventional monetary policies such as quantitative easing (QE). Over time, this led to a significant increase in the money supply – which drove the rate of inflation.

Do Cryptocurrencies Have Inflation?

In order to understand which coins have the lowest rates of inflation, it is important to first understand what inflation is.

Inflation is defined as an increase in the price of a basket of goods and services over a period of time. The consumer price index (CPI) is often used as a measure of inflation. The CPI measures the prices of a fixed basket of items, including food, shelter, clothing, transportation and health care. The changes in these prices are used to calculate the inflation rate.

Cryptocurrency prices are not based on CPI. Rather, they are based on supply and demand. When demand for a cryptocurrency is greater than supply, the coin’s price increases, and when demand is less, the price decreases. Cryptocurrency prices are also affected by speculation as investors buy coins hoping they will appreciate in value.

While cryptocurrency prices are not qualified by inflation, it is possible for them to be affected. For example, if the US dollar were to experience high inflation, it would likely lead to an increase in demand for Bitcoin (BTC) as investors would seek to protect their assets from the dollar’s eroding value.

However, it’s important to remember that no asset is completely immune to the effects of inflation. Inflation affects all cryptocurrency assets, including bitcoin, which is sometimes referred to as “inflation-resistant.” This is all the more true given that mining rewards for new bitcoin blocks are automatically halved every four years, and inflation rates for bitcoin inevitably fall into 4-year cycles.

Bitcoin has a limited supply, which means that only a certain amount can be mined, after which no other tokens can be circulated. The limited supply is an important distinction from something like the US dollar, which has no fixed upper limit on supply and can be printed indefinitely. Despite a maximum supply of coins, there is also inflation in all other cryptocurrencies.

All cryptocurrencies are subject to inflation, but some are better than others. In this article, we will discuss the coins with the lowest inflation.

Cryptocurrency inflation rates are also predictable and controllable, which sets them apart from fiat money.

Crypto coins with lowest inflation rates

Inflation is a very critical issue in the crypto industry. As mentioned in the first part of this article, all cryptocurrency investments experience inflation at some point. For some, the inflation rate may be less than 1%, while for others it may exceed 10%. Here are some of the coins with the lowest percentage inflation:

Bitcoin

The purchasing power of bitcoin grows over time and is known as a “inflation-resistant” asset than “inflation-proof”. An inflation-proof coin is a coin that is fully protected against all external influences. In other words, the price of an inflation-proof coin is only determined by the market forces of supply and demand. Bitcoin is typically regarded in the financial industry as a reliable protection against inflation due to its pure market capitalization.

Corresponding woodbullBTC’s current inflation rate is 1.7%.

Monero

Monero is considered one of the lowest inflation coins as its block reward does not decrease over time like bitcoin. Monero has a flat block reward, which is always 0.3 XMR per block. This means that the rate of new Monero being circulated is always the same.

ether

ether is the second largest crypto coin in the world by market cap. Ethereum is a deflation system with a block reward that decreases over time. There is no maximum supply for Ethereum, which seems dubious at first glance. However, it is important to note that it has a fixed supply of 18 million coins mined annually. This results in an annual inflation rate of 4.5%. This number will continue to decrease as the block reward continues to decrease.

Litecoin

Litecoin is one of the first altcoins in the cryptocurrency world. It was created as a fork of Bitcoin, but with key differences. One of them is that it has a shorter block time, which means transactions are processed faster. Litecoin also has a higher max supply than Bitcoin at 84 million coins. Litecoin has an annual inflation rate of 4.26%.

Cardano

Cardano is a coin that aims to give underdeveloped nations access to the benefits of blockchain technology. It is unique in that it uses a proof-of-stake algorithm instead of a proof-of-work algorithm. This makes it more energy efficient than other coins.

The maximum supply for Cardano is capped at 45 billion and 71% of that has already been released. Cardano’s current inflation is around 1.95%.

Is there a positive side to inflation?

Not all coins are low-inflation currencies, some are also high-inflation coins. These are usually new coins trying to quickly increase their market share. A popular example is Bitcoin Cash, which has an inflation rate of 8.26%.

Inflation isn’t all negative. In fact, moderate inflation can increase spending and stimulate the economy.

The post Is Bitcoin Affected by Inflation? Crypto and Inflation: A Guide first appeared on Coin Insider.