With record inflation rates spreading around the world, can cryptocurrencies ease the pain? (Board)


The situation in the global economy appears to be in a state of knockdown. The financial boom in years following the 2008 crisis ended with the outbreak of the COVID-19 pandemic in early 2020. Social distancing measures and “stay at home” rules have severely damaged production, and numerous central banks have decided to issue massive amounts of fiat money to fill the economic loophole.

Two years later, this move (along with other economic hardships such as the Russian-Ukraine war and its financial consequences, particularly supply chain problems, surging demand and production costs) has resulted in a surge in inflation in many countries. In March, inflation in Turkey hit a year-over-year high of 61.1%. Countries such as the United States and the United Kingdom have also suffered heavy losses.

When inflation rates soared in the 80s, most people invested their depreciated fiat money into something that could hold their value in the future, such as real estate or gold. However, these days there are cryptocurrencies, and some residents of the affected countries seem already interested in diversifying their asset classes.

Major economies hit hard by inflation

When observing the global financial crisis, it makes sense to start with the United States, the strongest economy. In April this year, the Consumer Price Index (CPI) stood at 8.5%, the highest in 40 years.

Behind the negative stats could be the soaring electricity and gas prices during the coronavirus pandemic due to the Fed’s decision to print trillions of dollars and the military conflict between Russia and Ukraine.

However, not everything is so simple, because the troubles began long before the war in Europe. Supply chain problems were already hurting local (and global) economies and worse over the past few months. As raw materials and labor become more difficult to find, products and inventories produced decrease, while demand may remain the same or even increase.

The effect is more than what the eye can see. While transportation, housing, food, and everything else costs skyrocket every day, people’s salaries take time to reach the levels they need to cope with these upheavals. So many individuals have started looking for solutions, and those with the experience and financial ability have distributed some of their fortunes among precious metals, real estate, bonds, stocks, and digital assets.

Numerous financial experts and crypto proponents describe Bitcoin as a digital version of gold and a successful hedge against inflation. Paul Tudor Jones, Ray Dalio and Jordan Peterson are a few examples. The talk that BTC could be used as a suitable anti-inflation tool comes from its limited supply (only 21 million coins exist to date), accessibility and decentralization (not printed or controlled by a central bank).

The accessibility feature is particularly interesting as some of the aforementioned assets, which are generally considered safe havens, are not as accessible as BTC. All a user needs to do to use the Bitcoin blockchain is access to the internet, and choosing a centralized exchange can create an account and verify it relatively quickly. Investors can also buy very small amounts of BTC (not necessarily all of them).

Weighing in on this issue, Bitcoin bull market Michael Saylor recently advised people to seek refuge in their underlying digital assets, arguing that inflation rates in the US are actually higher than those reported by authorities.

Next countries with inflation reached The culmination of 40 years is England. In addition to the reasons mentioned above, the regional crisis was triggered by the exit from the European Union, a measure known as Brexit. Experts expect the UK’s cost of living to rise as the UK ceases to be financially connected to other European countries.

According to a recent Coinbase report, cryptocurrency adoption is on the rise in the UK, with 33% of Britons already jumping into the asset class. While Bitcoin and Ether are the most commonly owned, Dogecoin and Binance Coin occupy the top four positions.

Record inflation dominates in other countries

In April, Brazil, the largest country in South America, outstanding The inflation rate rose the most during the month when the Consumer Price Index IPCA rose from 11.04% in March to 12.1% 30 days later.

Brazilians are the global leaders in crypto adoption, according to Gemini’s survey, with 41% of participants conceding that they own Bitcoin or altcoins, given the financial turmoil.

Nigeria’s inflation rate title Monthly north, now over 16%. Interestingly, KuCoin estimates that there are over 33 million cryptocurrency investors (35% between the ages of 18 and 60) in one of Africa’s financial hubs. Aside from fears of inflation, a significant proportion of Nigerians distribute their assets to the cryptocurrency market as they have limited access to financial services.

Despite the negative trends in all these countries, the inflation crisis appears to be more severe in Turkey. At the end of last year, Turkey’s fiat currency, the Turkish lira, lost significant value against the US dollar. Many criticized Erdogan for his controversial policy leading to a sharp decline.

Turkey’s inflation rate in March this year surpass 60% (YoY). Gold is still the country’s most important and widely used investment vehicle, but as an authoritative government, you may have problems with this. urge The population may transfer their precious metal holdings to support the economy.

At the same time, local residents gradually shift focus Bitcoin and Tether are pegged 1:1 to USD, allowing people to buy the nearest USD option on the blockchain.

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