Is Crypto the Answer to the Rising Inflation in the Pandemic and Political Unrest?

The pandemic outbreak in 2020 affected consumers’ spending patterns partly due to lockdown policies globally. It raised concerns by economists about the accuracy of the inflation measures in capturing price changes. Since inflation is a constant threat to the value of fiat currencies, people tend to protect their assets by investing in Gold or other assets that can maintain their weight over time.

A Hedge Against Inflation

Russia’s consumer price inflation reached a six-year high in February, mainly due to the rise in food prices. The data released by the Rosstat agency showed that the annual rate was 9.15 percent.

Bitcoin, the top crypto by market capitalization, is a deflationary asset. Hence, citizens worldwide are increasingly using it to protect themselves from rising prices and hyperinflation. With crypto, interest rates and money printing cannot be altered as quickly as with fiat. 

Furthermore, Bitcoin’s supply will never exceed 21 million, making it a stable and inflation-resistant store of value. However, the volatility of the crypto market remains a topic of debate despite Bitcoin’s popularity over the past year.

Transferable Store of Value

Bitcoin and other cryptocurrencies are durable, readily interchangeable, safe, and rare. It is also more portable, transportable, and, in some ways, more decentralized. As a result, anyone anywhere globally may store and secure their Bitcoin.

Bitcoin’s blockchain technology has real-world applications. Bitcoin has few practical uses in wealthy countries with relatively stable fiat currencies as a currency. However, Bitcoin is a superior exchange form in nations prone to hyperinflation and political unrest.

Stablecoins are also becoming more popular with folks in hyperinflationary economies. Stablecoins are an excellent option as more retailers and stores begin to accept cryptocurrency as payment. BUSD and other fiat-backed stablecoins are becoming more popular in unstable markets.

A Better Method of Trading

Forex trading and different fiat currencies is a popular method of inflation combating. Stablecoins, unlike traditional currency exchanges, may be acquired 1:1 with USD by wire transfer. Other stablecoins, such as BUSD, USDT, USDC, and TUSD, can also be converted and received with no costs.

Crypto in War

It isn’t the first time people turned to crypto to support a country in crisis. But, it feels like the first time that crypto has become the main topic of discussion when an international conflict breaks out.

For example, Nadya Tolokonnikova, a punk band Pussy Riot co-founder, has organized a crowdfunding campaign to support the Ukrainian people. Vitalik Buterin, the Russian-born founder of ethereum, has encouraged folks to donate to humanitarian efforts in the country with crypto.

Although digital currencies have the potential to help people flee war zones, they’re not yet clear how they will shape international conflicts. Regardless of their effects on society, cryptocurrencies are becoming a part of global economies. They’re helping people work outside of banks and financial institutions.

The Crypto Market’s Volatility Issues

Critics believe that the rise of cryptocurrencies in terms of value is the main reason for the influx of institutional money into the market. For instance, despite the drop in July, Bitcoin still managed to gain 2% during the year.

However, after Bitcoin’s drastic 45% drop in May, many investors shifted their attention to Gold. Bitcoin has been viewed as an immature sector and is yet to prove itself as a stable asset class or a haven store of value. On the other hand, Gold has a long history of stability and trust.