Record high inflation prompts investors to study Bitcoin carefully

Consumers in the United States and the world continue to feel inflationary pressures. Recent data shows that the Consumer Price Index (CPI) in October rose by 6.2% compared with last year, further raising doubts about the “temporary nature”. An inflation narrative from the Federal Reserve.

Due to high printing prices, the traditional financial market was hit on November 10th, as worries about uncontrolled inflation and loss of purchasing power weighed heavily on investors’ minds, with major indexes from new highs This was set earlier this week.

This is in sharp contrast to the price trend in the cryptocurrency market, where a bullish momentum triggered a 4.7% increase in the price of Bitcoin (Bitcoin) Just like the published CPI data.

BTC/USDT 4-hour chart. Source: TradingView

The rapid rise in inflation in 2021 has led to more and more people calling for the Fed to end its loose monetary policy and raise interest rates. Many people claim that the central bank has pushed itself to a desperate situation and there is no easy way forward, because rising interest rates may make it more challenging to repay U.S. Treasury bonds.

According to a recent statement by former U.S. Treasury Secretary Larry Summers:

“The global financial market seems to expect slow growth and low real interest rates in the next few years, which will weaken the ability of the central bank to guide the economy.”

Since interest rate control is the main tool that the Fed can use to influence the market, the central bank seems to have no other choice but to continue printing money to meet ongoing challenges.

Bad for fiat currency, good for cryptocurrency

Cryptocurrency holders are in a unique position to benefit from these latest developments, or at least gain some shelter, as the devaluation of fiat currencies such as the U.S. dollar highlights the power of Bitcoin and other altcoins as a hedge against currency depreciation and inflation.

According to Bitcoin Stimulus, Americans who deposit $1,200 in stimulus checks into BTC from April 2020 will now own $12,172 worth of BTC. This represents an increase of 914%.

The current value of the $1,200 stimulus check as of April 15, 2020. Source: Bitcoin Stimulus

And these gains are not isolated from the top cryptocurrencies, because the entire market has seen an influx of funds, increasing the total market value from US$190 billion to US$2.95 trillion in the same period.

The total market value of cryptocurrencies. Source: CoinMarketCap

In addition to the increase in the value of a large number of tokens in the market, cryptocurrency holders have also received a large number of cryptocurrency “stimulus checks” in the form of airdrops, such as the recent airdrop from the Ethereum name service. Created a five-figure payday for early adopters Agreement.

In general, as the purchasing power of fiat currencies deteriorates, participants in the cryptocurrency market benefit from the protection provided by holding assets that have appreciated in value. If the inflation rate continues to rise, this process will not slow down in the foreseeable future. rise.

The views and opinions expressed here only represent the views of the author and do not necessarily reflect the views of Every investment and trading action involves risk, and you should conduct your own research when making a decision.