Home Cryptocurrency Can The Crypto Market Affect Inflation?

Can The Crypto Market Affect Inflation?

by admin

Most of you must have heard that Bitcoin is meant for combatting inflation. Inflation is a kind of process in which the value of the currency may decrease. Those who live in the USA must have seen that with the same US dollar, they get less amount of goods or services over time.

In fact, inflation is generally created when the government is compelled to print more money than what is needed. This is the same reason why often your grandpa talks about how all goods were cheaper when he was young.

Your USDC wallet is 100% backed by actual US dollars held in reserves which are at the ratio of 1:1. As a digital currency, USDC will need a digital wallet offered by Zengo for storage.

Very recently, many economic experts had forecasted that inflation will increase significantly in 2020 because governments all over the world were compelled to inject dollars to help stimulate the stagnating economy because of the pandemic.

Since the beginning of 2022, stocks, cryptocurrency, and many other commodities have gone through volatility as investors had tried to factor in higher energy prices.

Even when there will be very less money circulating around in the markets, investors have got an inclination to look much beyond the headlines of the day.

A few experts claim that periods of stock market volatility will invariably follow an increase in interest rate.

Market observers disagree on whether the Fed will act too strongly or too softly and whether this has already been included in stock prices. The markets’ volatility is a direct result of this uncertainty.

In the interim, markets continue to react to these hefty rate increases in the hopes that the Fed would be able to better control inflation and bring it under control. As a result, investors should expect the remainder of 2022 to be challenging.

During inflation the role played by crypto and bitcoin

People frequently try to take various measures to safeguard themselves by investing their money in assets that will hold their value over a period of time since inflation has always been a danger to eroding the value stored in money.

Traditionally, gold has been regarded as a hedge during inflation. However, in the recent times, cryptocurrencies have gained huge popularity as a more practical choice.

Hedging against inflation

As bitcoin is fundamentally a deflationary asset, hence people with unstable fiat currencies prefer to utilise it more and more as their store of value for guarding against hyperinflation and also rising prices for all basic goods and services.

The questionable volatility of the crypto market

According to detractors, the overall price growth of cryptocurrencies over time is the main driver of the rising institutional investment in the cryptocurrency sector.

For instance, Bitcoin was still up 2% for the year despite a sharp decline from its most recent all-time high of almost $30,000 in July. The yearly gain reached 300% in August.

Though many investors returned to gold after Bitcoin’s sharp 45% decline in May, they saw cryptocurrencies as an unproven industry that has not yet demonstrated that it is a stable asset type or a safe place to store your money.

A significant degree of stability and confidence are necessary for any asset utilised as a store of wealth and an inflation hedge as per the research and development group ZenGo.

You may also like