Bitcoin and cryptocurrency are not a barrier to inflation
U.S. Chairman of The Federal Reserve, Jerome Powell, recently announced that the Fed will now focus on addressing inflation to close “unemployment.” The Fed, in fact, doubled the same inflation policy it had attempted during the 2008 global financial crisis.
Speaking at a recent Jackson Hole event, Powell said the Fed would not raise prices anytime soon. He added that the Fed would tolerate higher inflation, up from the 2% inflation rate. This cheaper price and higher inflation policy take a limited reduction to a whole new level.
A study by the Federal Reserve conducted by the Bank of Japan during the 2013 economic crisis warned that high inflation could lead to “chronic inflation, even if real economic activity is strong or there is a risk of financial instability.” The Bank of Japan unveiled in March 2013 inflation and quality to boost the Japanese economy and boost inflation.
On the heels of Jackson Hole’s speech, the dollar dropped to the euro, and gold returned to a high level in 1950. Meanwhile, Bitcoin (BTC) has dropped; Ether (ETH) is stable; and the shares reconvened. The Fed will not be able to change course from its new policy easily, however.
Cryptocurrencies as inflation barriers
As governments print an unlimited amount of money for savings and inflation, inflation is likely to send higher basic prices. Obviously, the fiat system is incomplete. The crypto media uses the threat of inflation to announce the benefits of cryptocurrencies. Contrary to what has happened after the slowdown in inflation, the economic downturn, government bailouts and currency stimulation, Bitcoin and cryptocurrencies have been seen as a barrier to inflation.
Bitcoin, however, remains a new technology. In times of economic uncertainty, investors still prefer the influx of gold and stocks as safe assets. In the case of gold, according to Morningstar data, the S&P GSCI Gold Index gained 7.2% in the last three months of 2018, the stock market fell by almost 14%. Even in the recent bear market where prices have dropped by 33%, the gold index has dropped by only 2%. The price of gold will then rise in the next few months to record levels. Gold volatility, however, can go either way. About a third of the fund managers who voted in the August 2020 Bank of America Global Fund Manager Survey said they believed gold was too expensive.
Demand of Cryptocurrencies
From the president of Fidelity introducing a new Bitcoin wallet to $ 1 billion Bitcoin and a Grayscale asset manager reporting its largest quarterly entry of nearly $ 1 billion, the demand for Bitcoin institutions has been rising during the COVID-19 epidemic. This attention to the institution shows the seriousness of the big players who thought of Bitcoin as an investment asset.
Institutional funding, however, is just beginning to enter the cryptocurrency ecosystem, so the market is still mature and fragmented. Crypto needs more time to grow before it can be widely considered as a secure asset.
Investors today use Bitcoin as a value store because they think prices will rise in fiat terms. However, this should not be the only purpose of investing in the crypto market. If people invest in this space because the financial system is collapsing, then we will see an unhealthy price increase followed by the collapse of the crypto index.
In such a case, investors will flock to the industry not because of crypto technology or the deflationary nature of Bitcoin but because of fear of loss.
Investors and crypto enthusiasts often talk about crypto in relation to fiat money, but it was not the intention for cryptocurrencies to be integrated that way. The intention was to make another fiat.
Crypto lovers are the newest 21st century hippies. We do not protest in the streets. We are building another route. To build it, we need to go back to our roots and stop mixing crypto and fiat.
We do not want the crypto market to grow because the traditional financial system has failed. We want to see this market grow because investors want freedom of choice and financial freedom. Bitdenex gives you the opportunity to build your cryptocurrency without the obligation Opening a Bitdenex account is easy and completely free. In short, knowing cryptos without hurdles.