Is the global economy in unknown territory right now compared to Bitcoin (BTC) and inflation? For most of the short life of cryptocurrencies, the general economic environment has supported growth and prices have remained stable, but recently there have been new warnings of an inflationary storm.
If so, what does this mean for Bitcoin, which its proponents have long identified as a hedge against inflation, despite the fact that it has not been tested this way since its inception in 2009? This means, will millions of people and organizations use bitcoin as a safe haven – an alternative to gold or US dollars?
Recent reports such as the 6.2% increase in the US consumer price index (CPI) in October – a record 30 years – are sober, although this recent increase in one national economy may be more related to the ongoing sharp decline in supply. chain. The repressed post-pandemic consumer demand is stronger than any long-term change in global markets.
“Yes, [that is, inflation] can be a problem,” Mauro Gillin, dean of the Judge Business School at the University of Cambridge, told Cointelegraph. But much of the inflation risk comes from consumers’ expectations for the future. If they believe that consistently high prices are a constant fact, they will buy goods sooner rather than later, and expect prices to rise.
“The fact that U.S. consumers are postponing buying expensive goods because of inflation suggests that they think inflation will go down,” Gillin said, adding, “I am cautiously optimistic that this is temporary.”
The rest is not very funny. “It is now clear that inflation is less transient than originally expected,” Itai Goldstein, a professor of finance at Wharton School, told the Cointelegraph. The world has seen an imbalance between supply and demand since the pandemic, and monetary and fiscal stimulus linked to COVID-19 has also been included in recent inflation reports, but “inflation appears to have deepened and it will take longer to decline” so that.
A global phenomenon?
“Inflation has accelerated, and not just in the United States,” Mark Chandler, CEO of Bannockburn Global Forex, told Cointelegraph. Last week “we also learned that the CPI in China jumped from 0.7% y / y to 1.5%.” Do you want to continue? It is not clear at the moment. “What we do know is that price pressure has not reached its peak and may not peak until next year.”
But what if global inflation gets worse? Then Leonard Kostowitzki, assistant professor at Boston College’s Carroll School of Management, told the Cointelegraph, “I expect the use of [cryptocurrency] by both buyers and sellers to really skyrocket,” adding that this is not the most likely outcome. :
“I do not expect this to happen in the foreseeable future. I suspect that inflation will be brought under control very soon – perhaps over the next four years – as politicians are forced to curb it. ”
Bitcoin recently saw a price increase after the debut of the first bitcoin futures ETF in the US, but now it seems to be driven by the persistent inflation we see in all the world’s major economies, said Sui Chung, CEO of CF Benchmarks. Director of Cryptocurrency Standards, Bloomberg.
Bitcoin, of course, has a fixed supply limit of 21 million BTC. By comparison, the US dollar is robust and M1 growth in the US has more than quintupled in the last five years, from $ 1.378 trillion in September 2016 to $ 7.245 trillion in September 2021 (426%), according to St. Louis.
“It is true that the appeal to cryptocurrencies such as bitcoin is due in part to fears of inflation in fiat currencies,” Goldstein said. “I suspect that inflationary pressures will increase the prices of bitcoin and other cryptocurrencies.”
But Bitcoin’s fixed ceiling may not mean much, others claim. “The price of bitcoin is driven by demand,” Guillen said. If people think it’s a good value store, they will buy BTC – this is what it looks like now, it’s legal. “But I wonder what happens when interest rates rise and people understand that government bonds will pay good interest rates, which is very safe.”
“I think I have to unpack the old pill with limited supply,” Chandler said. “You can talk about the cash flow now after a 40% rally in October, but about what happened to the economic base in the second quarter when BTC fell from $ 58,900 to $ 34,500.”