A South African's Guide to Using Crypto as an Inflation Hedge
Over the past few years, rising inflation has become a growing concern. Shrinking salaries, increasing everyday costs, and eroding the value of national currencies.
From 2020 to today, global purchasing power has dropped significantly: the USD down 20.77%, EUR 19.20%, and GBP 21.70%. Losses deepen in several emerging markets—ZAR lost 25.40% of its value, BRL: 29.56%, and TRY a staggering 85.24%. In response, individuals are increasingly turning to crypto to hedge against inflation and diversify their portfolios.
In this article, we'll introduce you to what inflation is, how cryptocurrencies can act as a hedge, the different strategies South Africans can use to protect their wealth, and the key risks to consider before getting started.
What Is Inflation and Why Does it Matter?
Inflation is the rate at which the general price of goods and services in an economy rises over time. When inflation occurs, each unit of currency buys fewer goods and services; in other words, the purchasing power of money decreases. Most central banks, including the South African Reserve Bank, aim for a low and stable rate of inflation, as a moderate level is often seen as a sign of a healthy, growing economy that encourages spending and investment.
For individuals, however, inflation is a crucial factor to watch. It directly impacts the cost of living, from the price of groceries and fuel to the cost of housing. When inflation outpaces wage growth, it erodes the real value of your income and savings. Over time, high inflation can significantly diminish your accumulated wealth, making it harder to achieve long-term financial goals like retirement or purchasing a home.
How Can Crypto Act as an Inflation Hedge?
Cryptocurrencies, particularly Bitcoin, are often considered potential hedges against inflation due to their unique monetary properties, which stand in contrast to traditional fiat currencies that can be printed by central banks without limit.
Bitcoin's design incorporates a fixed supply capped at 21 million BTC, creating a form of digital scarcity. This scarcity is reinforced by its deflationary halving mechanism, a pre-programmed event that occurs roughly every four years and cuts the rate at which new BTC is created in half.
This predictable and decreasing supply schedule has attracted significant interest from both retail and institutional investors. In terms of institutional demand, publicly-traded companies are holding over 1 million BTC as of October 7, 2025. This adoption reinforces Bitcoin's use case as "digital gold," an asset that acts as a safe haven and may retain or increase its value as the purchasing power of fiat currencies declines.
How South Africans Can Use Crypto to Protect Wealth
For South Africans looking to shield their wealth from the effects of a devaluing rand, the crypto market offers several strategies beyond simply buying and holding assets:
Investing in major cryptocurrencies: Holding established assets like Bitcoin and Ethereum can prove to be a viable long-term strategy. Their scarcity and network effects may help them serve as a store of value against a backdrop of rising inflation.
Yield-bearing stablecoins: Stablecoins are digital assets pegged to the value of a fiat currency like the US dollar. Some, like Ethena's USDe, are yield-bearing, meaning they are designed to generate regular returns for holders, offering both stability relative to crypto-market volatility and a potential income stream.
Crypto staking: Staking involves locking up your cryptocurrency to help secure a Proof-of-Stake (PoS) blockchain network. In return for your contribution, you earn rewards, typically in the form of more of that same cryptocurrency. It's a way to generate passive income on digital assets you are currently holding in your wallet.
Lending and yield farming: You can lend your crypto assets on platforms like VALR and earn hourly interest. Yield farming is a more advanced strategy where you provide liquidity to decentralised finance protocols in exchange for fees and token rewards.
Risks to Consider
While crypto offers compelling opportunities, it is essential to approach it with a clear understanding of the risks involved, especially when using it as an inflation hedge. Examples of such include:
Volatility: Cryptocurrencies are known for their extreme price volatility. Sharp and sudden price drops can lead to significant losses, potentially negating their effectiveness as a short-term store of value.
Potential security risks: Interacting with DeFi services carries the risk of smart contract vulnerabilities, which could be exploited by attackers. When using centralised exchanges, it's important to be aware of counterparty risks, such as the potential for exit scams and hacks.
Complexity: The crypto space, particularly DeFi strategies like yield farming, can be complex and requires a good understanding of the underlying technology and risks. One wrong character in the input of the recipient's wallet address can lead to a loss of funds.
Regulatory considerations: The regulatory landscape for digital assets is still developing in South Africa and around the world. Changes in laws and regulations could impact the market and the legal status of certain assets or activities.
Protect Your Wealth With VALR
Inflation presents a persistent challenge to wealth preservation, steadily eroding the purchasing power of currencies like the South African rand. Cryptocurrencies offer a range of modern tools—from scarce assets like Bitcoin to yield-generating stablecoins and staking—that can potentially help you build a more resilient portfolio. However, these strategies come with unique risks, including volatility and security concerns, that require careful consideration.
For those looking to get started, VALR offers a secure, regulated, and user-friendly crypto exchange in South Africa and beyond, where users can gain exposure to over 100 cryptocurrencies to protect their wealth against inflation. Besides buying crypto, you can also lend and stake digital assets to generate a passive income and preserve your wealth.
Here are a few practical steps to get started on VALR:
Create a VALR account by heading to this page.
Verify your identity to pass Know Your Customer (KYC) checks and unlock the complete functionality of the platform.
Deposit crypto or fiat currency into your VALR account.
Buy crypto via the Simple Buy/Sell feature or via VALR's spot market.
Ready to protect your wealth against inflation? Get started on VALR today!
Risk Disclosure
Trading or investing in crypto assets is risky and may result in the loss of capital as the value may fluctuate. VALR (Pty) Ltd is a licensed financial services provider (FSP #53308).
Disclaimer: Views expressed in this article are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.