How and where to invest to protect money from inflation

If there is one word that best describes the portrait of the planet's economy at this time, it is: inflation.

The year 2021 closed with a rise in prices of 6.43%. The monthly increase was 0.52%, a rate that, according to the National Institute of Statistics and Informatics, had not been recorded for 13 years. Added to this is a global context of war that many hope will not spread or escalate.

But what should we do in the face of inflation and suns that seem to lose brightness with devaluation?

Some experts agree that it is necessary to invest in safe places. Contrary to what many would think, this does not mean keeping it in cash, because the less the currency is worth, the faster the savings will decrease. Keeping it in the bank is not so convenient either, because when inflation is higher than the interest paid by the financial institution, money, instead of generating profitability, continues to lose its value.

In that sense, the crypto assets segment has begun to gain the attention of many, because with responsibility, it is one of the ways to be able to make savings with a view to obtaining future returns without compromising an entire heritage.

For decades investors have found a place in precious metals to safeguard their wealth, but technology and new investments have come to make a change in the way profits are earned.

Gold, for example, is still of high value and is accepted anywhere in the world, but it cannot always be used as a means of payment. In contrast to what many know as digital gold or bitcoin, it can be used to carry out certain transactions and since its supply is limited to 21 million, its price is more likely to increase compared to the precious metal. The reason for this is based on a supply and demand relationship. Every time the price of gold increases, miners are encouraged to extract it from the earth and its price returns and falls. In the words of Maximiliano Hinz, director of Binance Latin America, those who choose to invest in cryptocurrencies as an alternative to gold, should consider that “being in an inflationary economy at the level global, investment possibilities are limited with positive returns, but within the crypto world we can find low-risk alternatives that thus and all its returns are above inflation.” Likewise, he adds, that no matter what asset each one decides to invest in, it is important to have a strategy and diversify. The strategy allows us to know when to buy and when to sell and not be tied to market sentiments and it is in diversification that risk is reduced.

Although the real estate sector in Peru was not excluded from the effects of the pandemic and there was a halt in works, a delay in sales strategies and a fall in both housing and rental prices, the root farm remains one of the natural protections against inflation. The cause is right in the relationship with rising prices. If the value of the home rises, so will the rental price. Likewise, this situation may result in a short-term valorization, if and only if it is part of an investment with a future projection and where aspects such as the use and location of the property are considered. With regard to the safe haven seen in cryptocurrencies, a clarification needs to be made: although the risk may be greater, investing in these assets has been shown to bring higher returns than those obtained from renting properties. Added to this benefit is the liquidity and availability that cryptocurrencies represent, because if the owner of a building needs to sell it to recover his investment and profit, he will have to submit to market times and wait.

Unless someone has an account abroad, the local financial system does not allow dollars to be kept in a safe place. In this sense, the only way to be able to invest in dollars is to buy them on the market and keep them at home, which also poses a risk to personal safety.

Stablecoins or stablecoins work like any other cryptocurrency, they are designed to buy and sell goods and services. These are traded through blockchain or digital wallets and are linked to the value of the fiat currency they represent, in the case of BUSD, the variation in their price is directly proportional to the change in the price of the dollar. “There are many differences between a crypto and any other fiat currency, but the main one is that currencies such as the dollar are issued and controlled by a government, on a discretionary basis. In stablecoins, although they can be issued centrally or decentralized, once we have our coins, we can make 100% free use of them, without anyone being able to restrict the mobility of our capital” says Hinz.

The global macroeconomic landscape is a good scenario for cryptocurrencies. In the midst of a market that is reeling in the face of a situation that raises prices and that has forced Russians to try to move their assets through decentralized financial systems, a formula that, according to Maximilian Hinz's statements, seems to give rise to the perfect scenario to see a rebound in the price of cryptocurrencies: inflation, increased demand and the fear of being left out. These three factors play a fundamental role in increasing the value of these assets that are beginning to be seen as the ideal haven when financial instability and uncertainty are the order of the day.