First, crypto has a lot of potential because it is a relatively new concept. It opens the door to endless possibilities for the future.For example, if the technology associated with a cryptocurrency is mainstreamed by a top non-crypto brand, the chances of an Ether (ETH) coin increasing in value greatly increase.This allows early investors to potentially reap higher returns due to future scope. Bitcoin is the perfect example of how mainstream adoption can increase the value of a cryptocurrency.
Inflation reduces the value of fiat currencies over time but does not affect cryptocurrencies in the traditional sense. Why? Because cryptocurrencies are decentralized and have a limited supply.Governments or banks cannot manipulate crypto at will. More importantly, this means that cryptocurrencies have the potential to generate returns that exceed the rate at which a fiat currency loses value over time.However, this does not mean that cryptocurrencies are inflation-free. If more cryptocurrencies are mined, theoretically their value will decrease but there are measures to deal with this.The best example is Bitcoin. Bitcoin mining rate is cut in half every 4 years. This seems to have two broad implications. One, scarcity will persist and two, inflation will become negligible.
All roads lead back to decentralization. As we discussed earlier, governments or federal agencies cannot manipulate the value of cryptocurrencies because they have no control over them.Only the cryptocurrency holder has the necessary means to access their investment, known as a private key, which provides complete control over buying, sending and receiving cryptocurrencies.That said, if any government chooses to do so, as is the case in China, crypto can effectively be outlawed with the stroke of a pen. But free market economies have decided not to go that route.Countries like the USA, UK and India are trying to understand and regulate cryptocurrencies to introduce the fail-safe that made investing in equity securities reasonably safe decades ago.
