When most people think of cryptocurrencies, often what comes to mind are their complex code and all their different functionalities. However, one of their most valuable and overlooked use cases are their use as a store of value and protection against inflation. Inflation can be best explained as a measure of the purchasing power a monetary unit has over time.
The reason this use case is so often overlooked is that in most countries (I’m looking at you United States), citizens don’t have to worry about the value of their currency. However, other countries such as Venezuela, Turkey, and Zimbabwe have inflationary issues causing massive poverty.
The Venezuelan Bolivar faces around 2 million percent inflation a year making it near impossible to purchase everyday items like milk and eggs with the currency. Even with cryptocurrency markets massive decline, you would have saved more money holding Bitcoin from $19,000 to $4,000, than holding Bolivars in that same time period. Due to issues such as these, many cryptocurrency enthusiasts have become increasingly excited over this new use case.
Stablecoins
Some readers may also be familiar with the class of cryptocurrencies known as stablecoins. Stablecoins use algorithms and pegging to maintain the value of a coin. One of the most well-known stablecoins is Maker. There are also other coins pegged to the value of the US Dollar, such as Tether (USDT), USDC, and GUSD. You won’t grow rich holding stablecoins, and you certainly won’t go poor. Stablecoins are simply for defending against inflation.
Conclusion
As we saw pretty clearly during this bear market, cryptocurrencies still have a long way to go before they can be considered good stores of value for anything besides the edge cases we mentioned. As more people become involved in the space, the more price movement will be needed to affect the price. Even now, Bitcoin volatility is relatively low at around 1.3%. Regardless of which cryptocurrency you support, it will be exciting to see which countries if any decide to adopt cryptocurrency.
What do you think cryptocurrencies most valuable use case it? Let us know in the comments below!
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