Inflation benefits cryptocurrency investments – Cryptocurrency – CVBJ


For many, 2021 has been the year of cryptocurrencies with much of 2020. Although during this year which is about to end, the market has had some issues. We can say that it was an excellent year. Some pretty big highs have been reached, a lot of progress has been made in the cryptocurrency arena, and while there have been significant declines, the major cryptocurrencies have recovered quite well.

The success of the crypto market is no accident. The rise in prices and the confidence that investors of different levels have placed can be quite related to global economic situations. It’s no secret that the pandemic caused by the coronavirus has been a serious problem for the global economy, and it’s something that is becoming increasingly evident.

As countries tried to deal with the situation, a new variant of the virus reached several countries threatening the economic and health stability of their citizens. When this happens, certain conflicts are generated in the economy like inflation. It is no coincidence that in countries with the greatest economic difficulties, cryptocurrencies have become an alternative for carrying out transactions.

If governments do not apply the right strategies to protect the economy, it is possible that over the next year the virus attacks will be more severe and the fall in the value of many fiat currencies will become a serious problem. . We have already seen that when currencies like the dollar go down, the value of some cryptocurrencies goes up. And if the situation becomes more complex for the economies of the countries, the crypto market could benefit.

Turkey is in danger

Considering the issue of inflation and the dangers it poses to the economies of nations, Turkey is one of the most scrutinized cases. If we review the history of the Turkish Lira, it hit a record high in January 2008 and from that time until now it has lost around 93.8% of its value compared to the conversion to US dollars .

Faced with this situation, the Turkish president has tried to devise plans that can thwart the decline and control the number of victims, but this has not had the desired effect. The Turkish Lira continues to fall sharply and this is a trend that could extend much further.

The fact is that in recent months the decline in the value of the Turkish lira has deepened. So far, a loss of 55% of its value against the dollar conversion has been recorded, and this only from data taken since September of this year.

Inflation could become a global trend

Although the example we have taken is that of Turkey with the Turkish lira, this situation could extend to several countries in the world. While the Turkish government has tried to counter the declines and the plans have had some effect, the medium to long term outlook is not at all positive. Analysts say there is some weakness in the pound, but not just in the currency, but in several countries among many.

The reason why this could be a global trend, and not a problem that only affects Turkey, is that inflation is slowly reaching several countries that had not had problems with this problem before. Soaring inflation could become one of the biggest conflicts for the government in 2022.

The point is that with inflation the value of money drops. As the value of currency drops, the purchasing power of citizens decreases and everything is more expensive. Citizens will no longer be able to buy the same things with what they could before and this generates a decrease in the quality of life and other problems.

Inflation is no stranger to the global economy. Several countries, especially in Latin America, have high levels of inflation and hyperinflation, such as Venezuela. This country has the highest level of hyperinflation in the world, but also has one of the highest levels of commercialization in the entire continent.

And given the previous point, cryptocurrencies come into play. When fiat currency falls, inflation rises and purchasing power falls. In these situations, users are looking to protect their money so that the value does not fall and cryptocurrencies have become one of the best alternatives for this.

Cryptocurrencies could be the salvation

In countries that have a sufficiently stable financial system, the use of cryptocurrencies, especially decentralized ones such as Bitcoin, Ethereum, etc., is not in the interest of people. If the legal tender is sufficiently stable and does not present a risk of loss of capital, users do not need to look for new options.

Now when inflation occurs in countries, citizens are looking for alternatives to protect their money. This has happened in countries with restrictive economic systems, in countries with fairly high levels of poverty or in countries where the banking system has failed, as in many countries on the African continent.

One of the reasons why countries with stable economic systems are not interested in cryptocurrencies is related to the volatility of this asset class. Volatility is a reality we cannot ignore, but if there is the possibility of a sudden drop, there is also the possibility of a relevant rise that ends up leaving profits.

For countries whose currencies depreciate easily, they have no choice but to take a chance and roll the dice. Some prefer to bet on cryptocurrencies rather than wait for the money to devalue. Moreover, we cannot ignore the possibility of having big profits.

Is the future of the economy inflationary?

The future of the economy is somewhat difficult to predict, although there are some clues that point to the possibilities. One of them is the perspective that was given earlier this year by the world’s central banks. It should be noted that inflation is not something of this last quarter. This is a situation that has happened since the start of the pandemic, but now it could become more serious.

At the start of the year, it was estimated that inflation around the world would be transient. He proposed that even if there would be inflation, it would not last too long. Being for a short time, the recovery would be much faster and easier. The problem is that since the start of the transition period, there has been no recovery on the terms that the bankers have indicated.

Over time, central banks have had to change their rhetoric and adapt to the reality of the global economy. Some have classified this situation as one of the worst inflationary situations in history that can be recorded. If things are deemed a bit difficult at the moment, the situation could get a bit more tense.

The view of world economists is that inflation, which has not yet developed, could stick around for a long time. This means that economically important nations, like the United States, could be affected by high inflation and currency devaluation.

If this happens as analysts claim, cryptocurrencies could become the best and almost the only option to protect money. In the event that this is really the start for the global economy to turn into a bloated inflationary trend, things could get more serious and people would have no choice but to choose to put their money in crypto. -coins.

The best and worst time for cryptocurrencies could be nigh

If the inflationary trend goes global, the value of countries’ currencies will drop and this will make people choose to protect their money. This in turn introduces the theory that bitcoin can become a safe haven, although many analysts have denied this possibility.

The point is, if inflation rises, the tendency might be to invest in cryptocurrencies. This will make cryptocurrencies rise dramatically and the market will benefit. If that happens, it could be one of the best times for cryptocurrencies in all of history. The point is, regulation could complicate everything.

For some time now, interference from global regulators has increased dramatically. Central banks and countries are increasingly concerned about the use of cryptocurrencies. And if regulators enforce laws against cryptocurrency, the most viable option for citizens to protect their money would be eliminated.

We have already seen how some countries have taken relevant regulatory measures. China is one of those crackdowns that are well reviewed because they have banned the use of cryptocurrencies in their entirety. India intends to follow in China’s footsteps and although El Salvador has made bitcoin legal tender, the global trend is much more restrictive.

A few years ago, the possibilities for regulation, although they are taken into account, were not as high as they are today. If cryptocurrencies continue to represent a conflict for countries, they could restrict them and affect many investors, without taking into account conflicts linked to inflation.

Source: Finance Sina

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