Consumers in the US and around the world are still aware of inflation, and recent data shows that the Consumer Price Index (CPI) rose 6.2% in October from a year ago, raising more questions about “temporary” inflation. …leaves the Fed. …
As a result of the high pressure, traditional financial markets were hit on November 10, when fears of current inflation and a loss of purchasing power weighed on investors and major indexes retreated from all-time highs earlier in the week.
This contrasts with the price action in the cryptocurrency market, where strong bullish momentum has led to a 4.7% rise in the price of Bitcoin (BTC), just like the announced CPI data.
4 hour BTC/USDT chart. Source: TradingView
The rapid rise in inflation in 2021 has increased calls for the Federal Reserve to end its easy monetary policy and raise interest rates. Many argue that the central bank is stuck in a corner and has no easy options going forward because raising interest rates could make servicing US government debt more difficult.
According to recent statements by former US Treasury Secretary Larry Summers:
“It appears that global financial markets expect slow growth and low real interest rates in the coming years, which will weaken the ability of central banks to manage the economy.”
With interest rate controls being the primary tool the Fed uses to capitalize on its market power, it appears that there is little left to do other than continue to print money that the central bank can do in response to current challenges.
Bad for Fiat, Good for Crypto
Cryptocurrencies are in a unique position to take advantage of this latest development, or at least hide from it, because the decline in the value of fiat currencies like the dollar has highlighted the power of bitcoin and other altcoins as a hedge against currency devaluation and inflation.
According to Bitcoin Stimulus, Americans who have deposited a stimulus check of $1,200 in BTC since April 2020 will now receive $12,172 in BTC. This means an increase of 914%.
The value of the current stimulus check is $1,200 as of April 15, 2020 Source: Bitcoin Stimulus
And this profit was not isolated from the top cryptocurrencies because the entire market saw an influx of funds that pushed the total market cap from $190 billion to $2.95 trillion over the same period.
Total market capitalization of cryptocurrencies. Source: CoinMarketCap
In addition to increasing the value of a large number of tokens in the marketplace, crypto holders have also been rewarded with a number of “incentive checks” of cryptocurrencies in the form of an airdrop, such as the recent release of the Ethereum Name Service, which created a five-figure salary for early adopters of the protocol.
Overall, cryptocurrency market participants have benefited from the protection offered by holding assets that increase in value as the purchasing power of fiat currencies weakens, and this process shows no signs of slowing down for the foreseeable future if inflation continues to rise.