Crypto Opportunity in the Incoming Global Rise of InflationMay 23, 2020
A sense that there is incoming inflation, especially one that will span the globe, is never a welcomed feeling. This is one of the reasons why the analysts and financial experts often remain blind-sighted towards that possibility. History of the 20th century showcases just how true that is in many societies and moment in time. From the Weimar Republic to the dissolution of Yugoslavia, inflation and even hyperinflation is a process that deeply scars the population which goes through it.
In any circumstance, no one is to blame for trying to believe that this could not happen in the present moment and especially not with the leading Western economies. However, the reality of 2020 shows that many previously unimaginable things for several generations can come back in a spate of just a few short weeks. There is no reason to think that the same does not apply to the global economy, as well as the economies of individual nations.
Here, the level of development of the same nation will play a certain role, but nowhere near big enough to make sure that large and developed countries like US or EU member states are insulated from economic woes. That is why, if the pandemic triggers a cascading series of inflation issues around the world, the impact on the crypto market will also be complex, but certainly immense.
On the most basic level, cryptocurrency, mainly the bitcoin network, is already a winner in the discussion about the problem of inflation. From the moment it came into being, the same domain had an embedded mechanism that was there just for the very purpose of opposing inflation in the most mechanical, direct manner available. This was the hard cap on the number of tokens that could ever exist inside of the bitcoin blockchain network.
So, the moment bitcoin began working, there was a guarantee in the system itself that there will never be a bigger number of coins than the one that was initially defined. In the history of financial dealings, this was more or less a precedent and something that instantly made the same network inflation-proof. No matter how hard the BTC price swings might be or what could happen to the wider economic system, the network will remain defined, among other things, by the hard-capped number of coins that will or even can exist.
Of course, like always, the notion of bitcoin being predefined against inflation is something that reoccurs in the public consciousness once the economy worries become more prevalent. Today, because of the COVID0-19 coronavirus pandemic, the worries are all over the place. It does not matter if a person is a bus driver, casino worker, or an esports player. These as well as any other job profile are currently worried to some extent about their future and opportunities that might or might not come in the months ahead.
Presently, there is a lot of uncertainty and everyone sees this clearly, especially the national governments trying to figure out how to help their struggling citizens and businesses. The solution to which most came to is very worrying in the long run – it is basically a set of fiscal stimulus measures for the wider public and payroll sharing schemes as well as loans and other support means for businesses. This all boils down to the same concept in a variety of different applications: pumping more money into national economics using whatever means possible.
Solve it with Money
As the summer of 2020 slowly inches closer, there seems to be a consensus among the different governments of the world, regardless of their general political affiliation or internal organization. This consensus is stating that the solution for the present economic crisis that is bound to escalate includes bringing more money to the citizens, companies, and any other entity that is capable of spending them.
The initiative behind these stimulus packages – in all of their shapes and sizes – is to pull out national economies from the slowdown caused by the pandemic and the lockdowns that most nations took into effect. The hope is that when the same money hits the system and its numerous financial elements. Yet, there is a big problem with that notion – the economies of the world are already shrinking. GDP is sliding down everywhere, from the US to the nations of central Africa.
Industries like hospitality and travel are bound to be in the slump for years to come – only a successful and applied vaccine will be able to get these back on track. So, that money that the governments are pumping into the economies is mainly coming from international loans and only a part of it is funded by old reserves. The problem is here made apparent to anyone: with governments giving out money they do not have, where is the money coming from? The answer is that they are printing it and thus feeding into what will almost certainly become a vicious inflation process in many countries
Endemic Crypto Issues
With a wave of inflation problems inbound, one would think that crypto would be in the green for new adopters and more fiat becoming traded into bitcoin, ethereum, and other tokens. After all, these will have a permanent mechanism against inflation, so moving money like USD or EUR to BTC would seem like not just a prudent thing to do, but an utmost necessity. Otherwise, the same money will just keep losing value in the inflation waves.
However, this is where the crypto endemic issues – like incredible volatility that is sprinkled with unexplainable alignments with the traditional market, usually when they fall – comes to the forefront. This would mean that people would be running from the pan only to end up in the fire. Unfortunately for bitcoin, there is no possibility in sight that would make the problem of volatility go away anytime soon. So, while there will be some short-term major movements of funds in and out of crypto, all realize that holding BTC tokens will not make anyone immune to fiat currency inflations.