Global inflation is rising at an unbelievable rate – can Bitcoin save us from it? Answer from the experts
The world is now on the brink of another crisis, and some of its beginnings are already visible. First of all, we are talking about global price increases in food, gasoline and other essentials, which are increasing at a record rate for decades. With this in mind, many cryptocurrency fans have once again been reminded of Bitcoin’s historic property of increasing in value over a long period of time and saving the world from trouble. Will something similar happen this time? The experts tried to answer this question.
Let us start with the numbers. Yesterday it was reported that inflation in the USA in February 2022 was 7.9%, which was the highest in the last 40 years. Inflation in the Eurozone was around 5 percent, while the figure for the UK was 4.9 percent.
In Russia the situation is even worse. Weekly inflation in early March was 2.2 percent, although at the end of February the figure was 0.45 percent. This is a record since 1998 which hints at further problems.
The ruble is also depreciating amid sanctions imposed due to Russia’s actions in Ukraine. In particular, the national currency has managed to depreciate by almost half, directly affecting the financial situation of citizens. Moreover, foreign currency does not help much here because of the extra interest on its digital form. And there are no legal ways to buy cash dollars in Russia right now.
Graph of dollar exchange rate in rubles
Considering current events, the experts recalled Bitcoin, which was created as a response to the crisis of 2008. Today it is at $39 thousand, and the daily chart of the cryptocurrency does not look unequivocally positive.
Bitcoin’s daily chart
Can the first cryptocurrency resist a global recession? This question from Cointelegraph was answered by digital asset aficionados, finance pundits and even European politicians. Here’s their perspective.
What will happen to Bitcoin’s exchange rate amid the recession
To illustrate, here is a graph of consumer inflation (in orange) and Bitcoin’s value (in green). Judging by the data, so far the cryptocurrency is not saving from rising prices, as its value is also falling markedly.
Graph of Bitcoin’s inflation and exchange rate
Meanwhile, the head of the British cryptocurrency exchange CoinCorner Danny Scott is not surprised by the current situation. According to him, such developments were quite predictable.
This kind of change has been in preparation for the past decade, and the coronavirus pandemic has only accelerated it. Real inflation in this case is being swept under the carpet to create the appearance that “inflation is being controlled”.
Christophe de Boekelaer of Belgium also commented on what is happening. He became the first European politician to agree to be paid in Bitcoin. Apparently, he is not surprised by the situation either.
When we inject trillions in the way we did, at some point we will have to pay the bills.
Bitcoin’s potential
That said, de Boekelaer predicts the emergence of a “major currency and financial crisis”, i.e. a worsening situation.
Is it worth investing in Bitcoin
According to the politician, Bitcoin is indeed considered a possible escape from inflation in the US, but in Europe the attitude to it is not so unequivocal yet. At the same time, Christophe suggests that “because Bitcoin’s growth is limited and transparent, it may indeed become an effective inflation-fighting tool.
Unlike fiat currencies, other popular investment assets and even gold, the issuance of new coins does not affect the value of Bitcoin. This forms a solid base that makes BTC an attractive asset given high inflation on a global scale.
At the same time, de Boekelaer says that there is not enough data to “statistically prove” Bitcoin’s role as a good inflation-proof asset yet.
Bendik Norheim Shay, head of research at Arcane Crypto, also shared his opinion on the situation. He has much more confidence in BTC’s prospects.
Bitcoin is a great option for those who want to bet on crazy inflation. Or to be more precise, to hedge against such a scenario. A deficit asset with a limited maximum supply is a good alternative in case the global economy reaches incredible inflation rates.
The global economy in recent months in one meme
That said, Danny Scott added that “Bitcoin solves the problem of separating money from the state and in addition helps hedge against inflation in a decentralised and global way”. As the expert noted, in some countries like Argentina, inflation is already above the 50 per cent mark, which is forcing people to look for possible solutions to the problem. Bitcoin is one of them.
You don’t need Bitcoin exactly until you really need it.
Scott also notes the importance of educating people, and “not just about Bitcoin, but about finance and economics in general”. De Boekelaer adds that “purchasing power has fallen by half in ten years”, which is also an argument not in favour of national currencies.
The already mentioned representative of Arcane Crypto Bendik Shay shared his own conclusions about the situation. Apparently, he has no doubts about Bitcoin’s prospects.
It’s a long-term bet on an asset that will thrive in a world with massive depreciation of fiat currencies due to uncontrolled money printing and extreme inflation.
Free money in the US
We believe that cryptocurrencies could indeed attract the attention of investors in the current environment. This is supported at least by Bitcoin's limited inflation - it is currently at 1.75 per cent - and limited issuance, the pace of which cannot be changed at will by the government. Therefore, it cannot be ruled out that crypto could indeed be a good choice. However, it should still only be invested what investors can afford to lose.
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