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Inflation has hit a 30-year high, and everyone is affected by it. But one thing that is gaining in these tough times for its investors is cryptocurrency.
During these hard times, deflationary cryptocurrencies are performing pretty well.
According to the data released by the Labor Department, October has reported an inflation speed at its fastest in over three decades. Experts have recorded an increase of 6.2 percent compared to last year.
But as this inflation state has released, the top cryptocurrencies jumped to their all-time highs. The most responsive was Bitcoin and Ethereum. These highs supported the narrative that these coins are deflationary and act as a safeguard against inflation.
Gold will always be the gold standard for a trusted hedge against inflation. But there are some attributes that bitcoins also have that you should need to consider.
Let’s have a look at the best-performing deflationary cryptocurrencies in 2023.
List of Top Deflationary Cryptocurrencies in 2023
The first deflationary cryptocurrency on this list is the most popular one of them all… but tricky. Most people think that bitcoin is both deflationary and inflationary.
It is inflationary because more coins, besides supply due to the mining process. But, the max supply of this cryptocurrency makes it deflationary; there are only 21 million bitcoins available in the market.
Once this number is achieved, no new coins will be developed, and no block regards will be issued. The number of circulating coins will decrease as more and more private keys are lost, and coins become irretrievable.
Binance Coin (BNB)
BNB is a native token on Binance and a deflationary crypto token. This token uses the buy-back and burn approach. Each quarter annually, the Binance team reduces a fraction of those BNB coins.
Thai do so by repurchasing BNB from the investors and over 20 percent profit in the last quarter and then sending it to a dead or unspendable address.
In the beginning, the total supply of these coins was more than 200 million coins. And the plan is to burn at least half of its supply and make 100 million coins.
The last burn was the 16th BNB burn, and it happened in June 2021. During this process, 1,296,728 BNB coins were burnt. Their rough worth was around USD 393,673,653. On 16th August 2021, BNBs total supply was 168,137,036 coins.
CRO is the native token on the Crypto.com platform, which is a popular cryptocurrency exchange. Before the launch of this platform in March 2021, it burnt 70 billion CROs that roughly estimated to be USD 10 billion.
Out of those 70 billion coins, 59.6 billion CROs were burnt outrightly, and the rest of the 10.4 billion were burnt monthly using smart contracts. Right before the burn, this CRO was priced around USD 0.08, and after four months, the price reached USD 0.15.
It is another popular coin, and XRP is the default token on the RippleNet platform. This platform charges some fees for the transactions that go down here.
These fees are not returnable to the central authority and are not paid in rewards to the validators. Instead, it makes XRP a deflationary token.
The CAKE is the native token PancakeSwap platform. There is no maximum supply, and due to that, it is an inflationary token.
But it does have a coin burn mechanism which makes it a deflationary token. The supply of this token has reduced per block at around -18 and per day at around 560,400 coins.
The latest blockchain platform token is Solana, and it has created some market ripples recently. Very much like bitcoin, this token is both inflationary and deflationary.
You can have a good look at its capless coin supply and distribution, and you will see that it is an inflationary token. But Solana miners also burn the transaction fees that Solana pays, and this aspect makes it deflationary.
There is another Bitcoin-like crypto available, and it is a lighter version of BTC. The company reduces Litecoin mining fees every four years by 50 percent.
However, the LTC production reduces with time, and it will eventually stop once the supply reaches 84,000,000 coins.
Bitcoin Cash (BCH)
BCH is another deflationary token with a capped supply of 21 million coins. This crypto also reduces the mining rate by 50 percent every four years. It means the circulating supply reduces. Due to coin burn, this coin has seen a price hike.
When Antpool, a crypto mining pool that validates 10 percent of Bitcoin Cash transactions, announced that it is burning the 12 percent of the block rewards they received in 2018, the price went up noticeably.
Moreover, another blockchain project allied with Wormhole burns BCH to create an equivalent amount of its native token worth.
Polygon is yet another blockchain technology platform, and its native token is MATIC. It serves a couple of purposes. One is to pay the transaction fees, and the other is to participate in the PoS consensus program.
Therefore, a percentage of transactions in each block is burnt for providing constant support to the coin’s overall value.
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What is Deflationary Cryptocurrency?
Deflationary cryptocurrency tokens are the ones that reduce supply over time. In other words, the total number of circulating token supply tends to reduce over the years.
The purpose here is to prevent over-flooding of the market with that particular token. It also improves the overall value of the token.
For example, a coin that reduces in supply by 2 percent each year. Suppose there are 20,000 such coins in supply in a year. By next year, it will reduce to 18,600 coins.
Then, in the third year, the supply will reduce to 18,228 and then 17,863, and so on.
As these coins reduce in number, their demand and their value will increase. Different crypto projects for these deflationary tokens achieve their purpose in various ways. But there are two ways to remove coins from the market.
Buy-Back and Burn
In this scenario, the company is in charge of the cryptocurrency project, and it buys back a significant portion of the coins from the market and burns them. Burning refers to sending them to a dead address. Doing this reduces the supply by discarding the tokens.
As a result, it can increase the overall value of that coin as the deadman remains the same while supply reduces.
Burn on Transaction
The coin contract elaborates that a percentage of the tax transactions on-chain will be burnt in this scenario. In simple words, all on-chain transactions that involve the coin attract a tax percentage, and the tax collected is burnt.
It occurs automatically because the burn-on-transaction integrates into the coin contract. But the success of this relies on the coin’s trading volume due to the deduction only occurring when these transactions occur.
Moreover, its success will depend upon the overall trading volume of the coin. It is because the deductions will not occur at the time of the transaction. So, with a higher transaction volume, more tokens are removed from the supply.
Driving the value to the token holders while consistently burning the circulation will keep the demand constant or increase it with consistently deteriorating supply.
Why Trade Cryptocurrency?
Unless you have been living under a rock for the last couple years, you have probably been aware of the movement that is cryptocurrency.
The cryptocurrency market has exploded over the last few years, and while there were a lot of skeptics out there that believed it to be a short-term thing, it has instead proven to be something that is probably going to stay around for a long time to come.
If you want to be a part of the future, we suggest that you consider investing in cryptocurrency.
How do You Trade Cryptocurrency?
The best way to trade cryptocurrency is to sign up for a cryptocurrency platform, where you can purchase, sell, and trade cryptocurrency tokens.
High-quality crypto currency exchanges are also going to let you store your cryptocurrency tokens on their platform, usually in the form of a virtual wallet.
Why Invest in Deflationary Cryptocurrency?
One of the biggest reasons why you might want to consider investing in deflationary cryptocurrency is because it holds its value, due to the fact that there is a limited amount of it.
If you are investing in a cryptocurrency that has no limit, then the demand is never there, and the value isn’t going to increase.
There are some other deflationary cryptocurrencies available too.
These include the likes of Ethereum Classic (ETC), SafeMoon SAFEMOON), Tenset (10SET), Filecoin (FIL), Tron (TRX), Bomb (BOMB), Nuke (NUKE), and so many others.
These tokens increase in value as a percentage of their supply is burnt after a specific time. So some of them are inflationary and deflationary.
But their rarity makes them a heck of an investment for some as they shield themselves against inflation and price hike.