Inflation winds from all over the world have brought earth-shaking changes to Bitcoin


Compared with Bitcoin, is the global economy now in uncharted territory?Bitcoin) And inflation? For most of the cryptocurrency, the economic environment has generally promoted growth at stable prices, but recently there have been new warnings of inflation storms.

If so, what does it mean for Bitcoin, which has long been promoted by the partisan as an inflation hedge, even though it has not really been tested in this way since its inception in 2009? In other words, will millions of individuals and institutions flock to BTC as a safe haven—an alternative to gold or the U.S. dollar?

Recent reports such as Up 6.2% in October The US Consumer Price Index (CPI)-a 30-year record-is alarming, although this recent expansion of the single national economy may be more related to continued supply chain chaos and pent-up consumer demand after the pandemic Any long-term changes in the global market, not related to it.

“Yes, it [i.e., inflation] It may be a problem,” Mauro Guillén, dean of the Judge Business School at the University of Cambridge, told Cointelegraph. However, most of the dangers of inflation are related to consumers’ expectations of the future. If they believe that rising prices are an eternal fact in life, then They will buy goods as soon as possible, and the prices are expected to be higher.

“The fact that American consumers are postponing their purchases of bulky goods due to inflation shows that they believe that inflation will fall,” Gillen said, adding: “I am cautiously optimistic that this is only for the time being.”

Others are not so optimistic. Itay Goldstein, a professor of finance at the Wharton School of Business, told Cointelegraph: “It is now clear that inflation is not as short-lived as originally hoped.” After the pandemic, the world is struggling with the imbalance between supply and demand, and COVID-19 -19 Related monetary and fiscal stimulus measures are also included in the recent inflation report, but “it seems that inflation has taken root in the hearts of the people and it will take longer to subside,” to him.

Global phenomenon?

Marc Chandler, managing director of Bannockburn Global Forex, told Cointelegraph: “Inflation has accelerated, not just in the United States.” Last week “we also learned that China’s CPI rose by 0.7% to 1.5% year-on-year.” Will it continue? It is not yet clear. “What we know is that the price pressure has not peaked yet, and it may not peak until next year.”

But what if global inflation deteriorates sharply?And then “I hope [crypto] The adoption rate of buyers and sellers will really explode,” Leonard Kostovetsky, assistant professor at the Carroll School of Management at Boston College, told Cointelegraph, adding that this is not the most likely outcome:

“In the foreseeable future, I don’t think this will happen. My guess is that as the pressure on policymakers to control inflation increases, inflation will soon be under control—perhaps in the next four years.”

Sui Chung, CEO of CF Benchmarks, stated that Bitcoin was recently boosted by the debut of the first U.S. Bitcoin futures ETF, but “now seems to be driven by the continued inflation that we have witnessed in all major economies around the world.” Cryptocurrency benchmark administrator, Tell Bloomberg.

Of course, the fixed supply cap of Bitcoin is 21 million Bitcoins. In contrast, the U.S. dollar is elastic. The growth of the U.S. M1 currency stock has more than fivefold in the past five years: from $1.378 trillion in September 2016 to $7.245 trillion in September 2021 (426%) , according to Data to the Federal Reserve Bank of St. Louis.

“Indeed, part of the appeal of cryptocurrencies like Bitcoin stems from the fear of fiat currency inflation,” Goldstein said. “I suspect that inflationary pressures will therefore help the price of Bitcoin and other cryptocurrencies.”

However, others believe that the fixed upper limit of BTC may not have such a big impact. “The price of Bitcoin is driven by demand,” Guillén said. If people think this is a good way to preserve value, then they will buy BTC-he admits, this seems to be the case now. “But I want to know what happens when interest rates rise and people realize that Treasury bills will pay substantial interest, and it is so safe.”

Chandler said: “I think it’s necessary to dismantle the old view of limited supply.” “After a 40% rise in October, it is now possible to talk about currency links, but when BTC fell from US$58,900 to US$34,500, the second quarter’s What happened to the currency rules.”

The limited supply of Bitcoin may not even give it an advantage over other cryptocurrencies. Kostovetsky doubts whether Bitcoin’s liquidity limit gives it any major advantage over Ethereum (Ethereum) As a safe haven, for example. “The main advantage of encryption as an inflation hedge is that there are supply rules that cannot be manipulated by humans.” [i.e., politically motivated] An increase in supply will reduce the value of their savings,” he said.

Has a greater impact on developing countries?

Recent inflation discussions have focused on the United States, but China also seems to be feeling some impact.Producer price index Soar Following an increase of 10.7% in September, there was an increase of 13.5% in October (year-on-year). This raises other questions: Will global inflation hit developing countries more severely than developed countries, and if so, are poorer countries more likely to use Bitcoin as an inflation hedge?

“I do see low-income people and countries being affected by inflation,” Chandler said, especially in countries with weak banking systems and large numbers of unbanked households. However, before they can use Bitcoin or other cryptocurrencies, they can say that they need at least a mobile phone and a certain degree of financial knowledge.

“It turns out that Bitcoin is a viable alternative to gold and other more classic inflation hedging tools,” HXRO Network CEO Dan Gunsberg told Cointelegraph, adding, “Poorer countries will continue to adopt Bitcoin. To hedge against inflation.” He added that although investors may flock to Bitcoin as a safe haven, it is still widely regarded as a risky asset and is often associated with other speculative assets such as stocks. Guillén is not so alarmed about inflation:

“So far, the inflation rate in emerging markets and developing countries has not been higher than in the United States. The dollar will remain strong. I don’t think we will see high global inflation.”

Into unmapped waters?

All in all, “We are in uncharted territory,” Kostovicki said. No one really knows whether inflation is severe and widespread or mild and partial, and Gunsberg added: “We have been in the uncharted territory of inflation for longer than publicly advertised, and this has been reflected in the price of Bitcoin. ,” as well as other financial assets in the past 12-18 months.

Related:Are institutional investors the main silent partner of cryptocurrencies?

Nonetheless, if inflation does rise sharply and the volatility of cryptocurrencies does decrease—it is undeniable that two big assumptions—then “people may deposit their savings in cryptocurrencies,” Kostowitz Kee told Cointelegraph that this really marked a huge change.