To discuss INFLATION AND CRYPTOCURRENCIES PRICE, it such an important and controversial issue, it is essential to know the terms that comprise it, including inflation as a macroeconomic indicator and the prices of cryptocurrencies in the environment, that’s why you should know the reasons to run a Bitcoin node.
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Inflation is the monster of economies
Inflation is the sustained and generalized upsurge in the prices of merchandise and facilities in an economy over time.
The increase of a single good or service is not considered inflation. If all the prices in the economy increase just once, that is not inflation either.
In short, inflation is produced by controls established by governments that print money needless.
As a result of the coronavirus pandemic, inflation was significantly high to the point that governments everywhere in the world were required to inject trillions of dollars to stimulate stationary economies to measure inflation growth; indices are used, which reflect the percentage growth of a weighted basket of goods. The inflation measurement index is the Consumer Price Index.
To stop inflation, central banks tend to increase the interest rate on public debt.
In this way, interest rates are increased on consumer loans such as credit cards and mortgages.
As consumer interest rates rise, demand for products slows
The effects of inflation
When inflation gets out of control, it leads to a situation of hyperinflation, causing the prices of goods and services to rise rapidly, while wages stagnate, the purchasing power of the currency decreases, and living costs rise.
Since Bitcoin emerged, it has been framed as an instrument designed to combat inflation.
Cryptocurrencies are global currencies, not always susceptible to the economies or policies of a specific country.
Anyone can access them, and they can be instantly transferred to anyone anywhere in the world.
Cryptocurrencies as a solution against inflation
Cryptocurrencies are decentralized: there is no official market so far, which means they can be traded 24 hours a day, seven days a week.
These digital assets have become a new alternative for those seeking to protect their wealth.
It sounds curious to think of an asset that can cover an inflationary scenario, but we deal with central banks that print money in response to any situation.
The most significant design advantage that allows Bitcoin to resist inflation has a limited and known supply.
Also, another point to keep in mind is that the creation of new bitcoins will decrease predictably over time.
There will only be 21 million bitcoins, and every four years, the amount of bitcoin that can be mined will be cut in half.
Bitcoin’s low annual inflation rate is not a determining factor for investors to consider
Cryptocurrencies may provide protection against the inflated money supply, but they do not create more goods and services.
The advantages of cryptocurrencies over traditional finance skyrocket in times of war and financial conflicts, which is why inflation contributes to their increase in value
The best cryptocurrencies for this scenario are the most established, such as bitcoin and Ethereum.
The main focus of most investors is on US-centered inflation fears, rising government budget deficits, and losing monetary policy.
It’s confidence, not inflation.
However, although inflation is not the main factor influencing the valuation of cryptocurrencies but rather the confidence that their users give, digital currencies continue to constitute an investment option in the face of inflation.
Both bullish and bearish periods have characterized cryptocurrencies by their volatility. Yet, it is that ease that they have of converting into an economic trend a certain feeling of approval or disapproval of digital currencies by large investors or users who can issue a comment that directly influences their value.
This sensitivity for many is dangerous as for others. But, on the other hand, it represents a great opportunity because they can predict with greater precision the movements they may have during a specific period, transforming this into greater profits.
Conclusion
In general, anyone seriously concerned about inflation should put cryptocurrencies on the table because inflation is produced or generated by the same government actors who, in their bad decisions, bet on the emission of cash that only impounds the pockets of the population more.
In contrast, Bitcoin, although it is volatile, will always generate benefits in the long term, and It is not affected by inflation; rather, it strengthens more in inflationary periods, which attracts more and more users in its favor.
