The Looming Inflation and How to Hedge Against It

Following the outbreak of the novel Corona Virus pandemic, Central Banks have had to resort to printing more money to save the dying economy. The US Central Bank, like others, reportedly printed more dollar notes to meet the growing demand of the American economy. 

As the deadly pandemic begins to recede and life goes back to normal, happenings and expert opinions all point to imminent inflation, with some speculating it could become hyperinflation. 

There is, fortunately, an array of ways to successfully hedge against inflation, one of which includes investing heavily in an asset class that has the potential to outperform the market during the inflationary period. 

Purportedly discovered in the Middle East before 6000 BCE, Gold is considered a perfect hedge instrument. In the last couple of years, locals have considered it an ideal substitute to their native currencies, especially individuals in countries where the value of the local currency is depreciating exponentially. 

A chemical element, Gold is a real-world asset that's capable of preserving its value for a long period. Currently selling for $1,783 per ounce, experts are predicting a groundbreaking surge in price before the end of 2025. 

Offering an ROI of 25% and above annually, Gold as an asset class is a perfect fund hedging instrument against looming inflation. 

Amidst the Covid-19 pandemic, the real estate industry, according to a January 2021 Forbes article, gained over $2.5 trillion in value in 2020 alone, taking the total United States housing market to a whopping $32.2 trillion  

With an annual ROI of 10.5%, the real estate market is shaping up to be one of the biggest markets and a perfect hedging alternative for investors. 

Currently worth over $680 billion in market cap, Bitcoin is shaping up to become a perfect hedge instrument. With a remarkable ROI, the 12-year old phenomenon is considered one of the biggest financial revolutions of this century. 

Like other investment opportunities, Bitcoin offers investors an opportunity to hodl [hold] or trade their assets daily for profits. With an annual ROI of over 302%, the digital currency seeks to eliminate the need for middlemen in financial transactions, therefore expediting payments and transfers between parties. 

Otherwise referred to as DeFi, decentralized finance, one of the biggest trends in the crypto space has opened up limitless opportunities for investors to get in on the market. The introduction of staking, yield farming, lending, and borrowing to the crypto market, according to most experts, is a boon not only to investors but to the industry. 

The influx of various projects ensures that investors get competitive interest rates and APY [annual percentage yield] each time they invest in any of the protocols. 

With billions of dollars locked up in various DeFi protocols as reported by DeFi Pulse, investors now see this nascent trend as a perfect hedge alternative. 

Uniswap is presently one of the very few DeFi protocols enforcing a necessary change in how investors are rewarded. A decentralized exchange like Twindex, Uniswap, via its many liquidity pools rewards users for locking funds. Being a community governed protocol, users reserve the right to vote for or against upgrades on the network. 

Another such DeFi project is Twindex. Built on Binance Smart Chain [BSC], the decentralized exchange and DeFi protocol attempt to help investors maximize profits via an array of farming options. Compatible with a ton of wallets, Twindex, via the integration of various advanced protocols and BSC’s scalable network can pioneer an era of higher annual percentage rate [APR] for investors seeking to hedge against inflation. 

The Compound [COMP] project, another DeFi protocol leaning towards lending. It is facilitating a system where individuals, regardless of location, can seamlessly lend and borrow funds. Besides offering users a perfect passive income source, this protocol is gradually cementing its stance as an ideal hedge instrument. 

As the world is gradually leaning towards inflation, investors would need a ton of hedge alternatives to invest heavily in to prevent full-scale depreciation of assets. This guide has mentioned a few of the asset classes with the potential of outperforming the economy. 

Fortunately, the advent of decentralized finance and its accompanying protocols have opened up more opportunities for teeming investors.

Disclaimer: Nothing in this article constitutes professional investment advice. Please do your own thorough research before making any investment decision.