Inflation remains a topic on everyone's mind these days. The tariff announcements by the Trump administration are only fueling concerns about the possibility of rising prices for goods and services across the board in the not-too-distant future.
A Motley Fool research report highlights how the core Consumer Price Index (excludes food and energy) was already trending higher, up 3.3% on a year-over-year basis in January. What's more, shelter inflation increased by 4.4%, faster than any other category.
These are uncertain economic times we are living in. So, it's understandable if you're worried that inflation will surge again, as it did in 2021 and 2022.
However, there is a way to position your portfolio if this is what your belief is. Here's one excellent cryptocurrency to buy right now and hold for decades. It can protect and grow your purchasing power over time.
Long-term inflation beneficiary
I can understand why investors would be skeptical of the claim that Bitcoin (BTC 0.32%) is a smart financial asset to buy when one thinks inflation is heading higher. After all, it doesn't always move in tandem with changes in inflation. In fact, its price tanked 65% in 2022.
But it's worth mentioning that short-term price gyrations can be caused by an unlimited number of factors, most notably liquidity trends and the risk appetite of investors at a particular point in time. Changing interest rates also play a role.
Plus, the market doesn't care if you believe something is an inflation hedge. Consequently, an asset is not going to automatically go up if prices across the economy do, too.
Gold works in the same way. When the CPI soared in 2022, the price of gold was essentially flat that year. You'd think that this precious metal would've absolutely skyrocketed then. Even in 2021, when inflation started its ascent, gold lost 4% of its value, while Bitcoin climbed 61%.
This points to the conclusion that what really matters is how an asset performs over the long term. To be more specific, the ability to not only maintain one's purchasing power but to grow it is the true mark of an inflation beneficiary. Bitcoin's monster 35,000% gain in the past decade is proof that it excels in this area.
CRYPTO: BTC
Key Data Points
Scarcity in an abundant world
There will only ever be 21 million Bitcoin units in circulation one day. This absolute scarcity is Bitcoin's most attractive characteristic. It flies in the face of fiat currencies that are constantly being debased. Bitcoin looks like a superhero when you consider how much government debt there is, almost $37 trillion just in the U.S., to be exact.
Over a time horizon that spans decades into the future, inflation will undoubtedly have periods when it's closer to the Federal Reserve's 2% target. It will also surely experience times when it surges without warning. This is the nature of the economy.
Making predictions is hard, but there is one important data point that could signal ongoing inflationary pressures over time. In the past 15 years, the M2 money supply of the four largest central banks increased by 137%. This trend has led to massive amounts of liquidity entering the economy, which flows not only to the prices of goods and services people need in their daily lives but also to the price of financial assets.
As a result, investors should favor something that has a hard fixed supply and has increased in value over the years in a remarkable fashion. Here's where Bitcoin shines, as evidenced by its historical price performance, but also by the fact that today, it only represents less than half a percentage point of all global wealth.
Buying and holding this top digital asset for decades means that your portfolio is positioned well to benefit from inflationary pressures.
