Record Inflation Rates Spread Worldwide, Could Crypto Ease Some of the Pain? (Op-ed)

The state of the global economy appears to be in a state of collapse. The years of financial boom after the 2008 crisis ended with the outbreak of the COVID-19 pandemic in early 2020. Social distancing measures and “stay at home” rules severely paralyzed production, while many central banks took the decision to print colossal amounts of fiat coins in an attempt to mend economic holes.

Two years later, the move (combined with the war between Russia and Ukraine and its financial consequences, among other economic difficulties, such as supply chain problems, rising demand and production costs) led to rising inflation rates in many countries. In March, inflation in Turkey reached a year-on-year high of 61.1%. Nations like the United States and the United Kingdom have also suffered severely.

When inflation rates galloped so high during the 1980s, most people invested their depreciated fiduciary currencies in something that could maintain their value in the future, such as real estate or gold. Today, however, we have cryptocurrencies, and some residents of the affected countries already seem interested in diversifying with the asset class.

Major economies receive a major blow from inflation

When the financial crisis is observed all over the world, it is worth starting with the strongest economy: the United States of America. In April this year, the Consumer Price Index (CPI) recorded 8.5%, a record high in the last 40 years.

The reasons behind the negative statistics could be the Federal Reserve’s decision to print billions of dollars during the coronavirus pandemic and rising electricity and gas prices due to the military conflict between Russia and Ukraine.

But it is not so simple, as the problems began long before the war in Europe. Supply chain problems were already hurting the local (and global) economy and have only worsened in recent months. Raw materials and labor are harder to find, leading to fewer products being made and stocks being lower, while demand has remained the same or perhaps even increased.

The effects are more than visible. And while transportation, shelter, food, and all other costs go up every day, people’s wages take a long time to reach the level needed to deal with the turmoil. As such, many people began to look for solutions, and those who had the experience and financial capabilities distributed some of their wealth to precious metals, property, bonds, stocks, and digital assets.

Numerous financial experts and proponents of cryptocurrency describe bitcoin as the digital version of gold and a successful hedge against inflation. Paul Tudor Jones, Ray Dalio and Jordan Peterson are some examples. The narrative that BTC could serve as a tool against adequate inflation comes from its limited supply (there were only 21 million coins), accessibility, and decentralization (not printed or controlled by central banks).

The accessibility feature is particularly interesting as some of the assets mentioned normally considered safe havens are not as easy to access as BTC. All users have to do to access the bitcoin blockchain is access to the Internet, and if they choose to go through centralized exchanges, they can create accounts and verify them fairly quickly. Investors can also buy very small amounts of BTC (they don’t need to buy a whole).

Weighing the issue, bitcoin bull Michael Saylor recently argued that the US inflation rate. UU. it is actually higher than what the authorities have announced, advising people to seek refuge in the main digital asset.

The next country where inflation has peaked at 40 is the United Kingdom. In addition to the reasons mentioned above, the local crisis has been fueled by the withdrawal of the nation from the European Union, a measure known as Brexit. Experts expect that the cost of living in the UK is likely to rise due to its disrupted financial connections with the rest of Europe.

A recent Coinbase report found that the adoption of cryptocurrencies in the UK is on the rise as 33% of Britons have already immersed themselves in the asset class. Bitcoin and ether are the most common, while Dogecoin and Binance Coin complete the top 4.

Record inflation reigns in other countries

In April, the largest country in South America – Brazil – marked the sharpest rise in the inflation rate in a single month when the IPCA consumer price index rose from 11.04% in March to 12.1% 30 days later .

In light of the financial turmoil, according to the Gemini survey, Brazilians are the world leader in adopting cryptocurrencies, as 41% of participants admitted to having bitcoins or altcoins.

The inflation rate in Nigeria also goes north every month, and is currently above 16%. Interestingly, KuCoin has estimated that one of Africa’s financial centers has more than 33 million cryptocurrency investors (35% of whom are between 18 and 60 years old). In addition to fears of inflation, a large proportion of Nigerians distribute their wealth in the cryptocurrency market because they have limited access to financial services.

Despite the negative trend in all these countries, the inflationary crisis seems to be even worse in Turkey. At the end of last year, the country’s national fiat currency, the Turkish lira, lost a significant part of its value against the US dollar. Many have blamed President Erdogan, whose political controversies could lead to a sharp fall.

In March this year, the inflation rate in Turkey exceeded 60% (year-on-year). Gold remains the most important and widely used investment instrument in the country, but there could be a problem with this as the authorized government has urged the population to hand over their holdings of precious metals to help support the economy.

At the same time, locals are gradually shifting their focus to bitcoin and even Tether, which, as it is tied 1: 1 to the US dollar, allows people to acquire the option closest to the greenback but in the blockchain. .


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