The effects of high inflation on the price of cryptoassets - Personal Opinion
Hello friends of Project Hope, today I want to share information based on a recent news that has come out and how it has affected the traditional markets as well as the crypto market. Today the inflation data in the United States was released, and it turns out that it has risen, so the markets have responded, as we have seen.
Today we were able to see a drop in the price in the first instance, but right now prices are recovering, which is good. Inflation is an economic phenomenon in which the value of money decreases over time, something that we can clearly see in the ability we have to acquire goods and services today, compared to what we bought long ago with the same amount. .
When inflation is high, investors look for assets that can protect their wealth from currency depreciation, and cryptocurrencies are often seen as an attractive option. And in my opinion, this is happening right now. More so, considering that institutions have entered the crypto environment, and it continues to arrive massively.
Now, why do cryptocurrency prices rise at times like this?, what I will share is part of what I believe, it is my analysis, it is my personal opinion, so I may be wrong or your opinion may be different .
Firstly, high inflation may increase demand for cryptocurrencies as a safe haven. Because some cryptocurrencies have limited supply and are decentralized, they are not subject to manipulation by governments or central banks that can print more money to combat inflation. Of course, this is always risky, especially if we consider alternative currencies that have low capitalization.
On the other hand, high inflation can also negatively affect the price of cryptocurrencies. When inflation is high, volatility in financial markets can increase, which can lead to greater volatility in the price of cryptocurrencies. So, we saw this today, that right at the time of the news, cryptocurrencies dropped in price, for example, BTC was at 70800 when they broke the news, and it dropped to 67500 in a matter of minutes.
Also, high inflation may have an impact on the adoption of cryptocurrencies as a medium of exchange. To explain myself better, if inflation is high, people will spend their money faster, before it loses more value, which can decrease the demand for cryptocurrencies as a form of payment. Although I am not seeing this, but in theory, and if centralized exchanges continue to be limited and so regulated, it could happen, at least that is what I think.
These are some of the things I think about it, I would like to know what else you could add. I leave. GREETINGS.
I guess most of the time, when Inflation is high, it actually tend to favour the investors as they will be able to have a lot of assets to consider. Just that it might affect the economy of the country
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Interesting read @josevas217
I like when people share their own views and opinions on topics they discuss.
Inflation data reading is bringing more uncertainty into the markets. And there is nothing worse for investors than uncertainty. Luckily those kind of uncertainty doesn't last long and I would usually expect that its going to be priced in within days since inflation reading latest update.
we need to assume that your point is correct - especially considering the fact that majority of investors see Bitcoin as a store value that is superior to gold.
However, I don't see other cryptocurrencies as a safe heaven and I'm not sure if other people often do. Each one of them (except of bitcoin) is more of a risky asset. I don't think any other crypto except of BTC could be considered "safe heaven" as a competition to traditional gold.
Great read buddy.
Cheers, Piotr