If you are interested in your wealth and financial topics in general, then you probably heard about the increasing inflation in the western world. USA got around 8.3%, the European Union reach 10.10% in August 2022. This is quite significant, as it means that your Dollar or Euro savings decreases in value over time.
What is inflation in simple terms?
Have you ever felt like everything you buy is getting more expensive? That exactly is inflation. It occurs when the prices increase across an economy. When you end up with less in your shopping basket for the same amount of money. When your purchasing power of your money, be it USD or EUR or any other currency, decreases over time.
Why do we have inflation? There is a quote from Milton Friedman “Inflation is caused by too much money chasing after too few goods”. Why do we have too much money? The governments had quite a few significant events to react to in the last couple of years to keep the economy stable: real estate bubble burst, southern Europe country bankruptcy e.g. Greece, C-pandemic to name just a few. Usually the governments got only one answer to these kind of events: Printing lots of new money to solve the problems. And print even more money. This works in the short term. There is barely any noticeable side effect also in the midterm. But in the long term it means more money, same amount of goods. So the goods get more expensive as there is more money around to purchase these good. People are willing to pay more. This is increasing the prices. Slowly, but surely. It is actually quite simple.
So what can you do to keep your wealth?
There are probably several way to defend your wealth in a inflationary environment. Either you have to invest in goods whose value increases in line with inflation, many investors consider gold as a great inflation hedge. Although if you look at the gold price in the last couple of years, this did not realize yet if you look at the gold chart.
The other way is to have an investment producing a cash flow beating inflation. With traditional investment vehicle this might get quite difficult or you have to increase your risk appetite drastically. This could also result in losses obviously.
This is where systems like Drip and Furio are coming into the game. I see these Defi system not only as great investments in general, but also as great inflation hedges. Why?
Drip and Furio as inflation protection
It is quite simple again: As we just learned together, to protect your wealth from decreasing in value due to inflation, your earnings have to beat inflation. This is currently between 8 and 10% annually, depending where you are located of course. How much profits do we make with Drip and Furio again? Exactly, more then the 10% per years.
With Drip providing us with a daily 1% reward, we can beat inflation within 10 days. Assuming the token price stays stable.
With Furio, if you reach the max. level and you gain 2.5% on a daily basis, you need only 4 days to beat inflation. Here again assuming the token price remains stable.
And if you keep compounding for more then just the 4 and 10 days respectively, you will beat inflation by light years.
What you have to keep in mind is that great profit comes also with certain risks. I wrote an article, many thanks to all the feedback I got, exactly about the risks I see in these systems and how you can mitigate them. Here is the link “Drip – What are the risks?”.
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