Crypto in the Summer and Winter of InflationMay 21, 2022
It is often hard to summarize financial news from across the globe, but in times of crisis, these become pretty much unified. That time is presently unfolding and the same period is spelling all manner of problematic possibilities in the coming months or even years. The key factor in so many different scenarios across the globe is the notion of inflation and money-losing value in a very rapid and dramatic manner. Starting from the USA and going all the way around the world and back to North America, the nations of the globe are in one way or another struggling with inflationary spikes and overall drops in economic growth.
That takes place, of course, not in a geopolitical vacuum but in a very dangerous scenario where the Russian Federation has invaded its neighboring Ukraine and created a cascade of events that only enforce the grim economic and financial predictions. In that complex environment, the cryptocurrencies of the world are also trying to find some manner of solid ground on which to prop themselves up, but this has so far not been working well. Instead of being any kind of a hedge against inflation, cryptocurrencies have also been spiraling down along with the traditional stock market and other forms of value. The summer in the northern hemisphere is promising record-breaking heatwaves, but at the present moment, no relief from these financial chills. The cryptosphere seems to be squarely in the same boat as well.
The number of issues that are currently ongoing for the wider economic domain of practically any country is staggering. Also, it is taking place in an environment of prolonged and seemingly never-ending issues that keep on stacking up. These are in turn able to deal damage that is constant and persistent for almost any domain. That includes everything from the heavy base resource-producing industry all the way to food production, services sector, and esports competitions. All of them are just as impacted by these as anyone else. These pressures are also able to interact and attenuate each other, building together like a rising storm.
It seems that the full impact of that storm will be visible at the end of the year when the northern hemisphere enters the late fall and early winter periods. Cryptocurrencies cannot play a major role in staving off those issues in any shape or form. They simply lack the real-world influence to manage to change these forces even slightly. However, they are still a very potent element in the lives of ordinary individuals and ways they can prepare for the possibility of overcoming these first and foremost inflationary pressures. Without crypto, the same will be just as possible, of course. But, the use of crypto could offer a means for a whole new dynamic that would be useful not just during this financial and economic storm, but also after it.
Crisis of Energy
At the heart of the current situation is the fact that much of Europe and the West are facing a form of an energy crisis. That problem is generated by an uneven implementation of green energy solutions that saw many nuclear power plants across the EU shut down in the wake of the Fukushima disaster. But, last summer showed that much of the renewable potential that was brought online in the past decade comes with a deeply embedded issue. In the case of wind turbines, that is the problem of not much wind during the summer of 2021. It meant that the consumption had to be compensated by the use of natural gas.
The same comes to the EU mainly from Russia, which is currently at odds with the rest of the West. That means that the upcoming winter will see huge energy prices and a lot fewer means to produce it in large or expanding quantities. For the crypto mining industry, that means higher prices for token production and a bigger pressure on ETH 2.0 and other proof-of-stake concepts to generate solutions faster.
The pressure from the energy sector means that mining will be harder at the end of 2022 financially for sure. Also, the lack of energy and its high price likely means that the pressure from the public will grow as well. Many will again voice their opinion that crypto mining is a senseless loss of energy and thus the pressure on legislative reaction to all of that will grow as well. From the regulatory standpoint, the chances of anything major happening related to crypto are not big, especially in countries like the US which will look for more opportunities for economic expansion.
However, the mining industry would be wise to try and apply some changes to use the energy in that production. That means the use of excess heat from the crypto mining operations. Home heaters that are also crypto miners are a good example of the same approach. Another is the use of crypto rigs in public buildings where they could add to the overall heating systems. That is a tall order for sure, but at least it offers a way to counter the public narrative of wasted energy. It also works as a means of actually utilizing proof-of-work networks for the reuse of excess energy that is otherwise way too often completely wasted.
Besides the issue of energy use, there is the problem of financial damage that will be seen in families and individual budgets across the globe. While it is clear that cryptocurrencies are not a full-on hedge against inflation, they can still be useful for so many people who want to diversify their savings. That does not mean investing huge amounts of money in crypto, but doing what is needed to create a digital wallet and at least stepping foot in the same space.
Crypto savings can then be employed through things like yield farming or other such activities that can further generate tokens. That alone will not save a home budget but it will go a long way to create some form of a hedge for all of those who are rightly worried about the coming inflationary wave.