An inflationary storm within the global economy is expected in the coming years. Since the introduction of cryptocurrency, there has been a pro-growth environment in the digital currency market with stable prices, however, that is changing slowly. Now the question arises, will this inflationary storm have an impact on the value of bitcoin?
Bitcoin, which has been promoted over the years as a shield against inflation, might come under the influence of this situation. We wonder if this cryptocurrency will continue to provide a safe haven and work as an alternative to gold for millions of individuals and institutions?
The consumer price index(CPI) of the United States recorded a 6.2% rise in October. The ongoing supply chain snarls and inflated post-pandemic consumer demand has resulted in a bulge within the single national economy. The secular change in the global market is not perceived to be the major culprit of that.
US consumers have been postponing buying big tickets that require major investments after they noticed significant inflation. This shows that they are hoping that this surge in prices is a temporary thing. On the other hand, some fail to stay optimistic and believe that this post-pandemic supply-demand imbalance will stay for a long time. They think that the monetary and fiscal stimulus related to the COVID-19 has also been a factor in the recent inflation reports.
A Global Phenomenon:
This inflation has not been found in the US system only. China has recorded a CPI that jumped from a constant 0.7% to 1.5%. In each case, it is not clear how long this situation will last. One thing is certain though. Even though the prices have not peaked so far, there is a high chance of them coming under this inflationary storm and resulting in rising prices next year.
If global inflation keeps getting worse in the coming years, there will be a significant surge in the demand for bitcoin. Buyers and sellers of bitcoin will adopt cryptocurrency with lightning speeds. The introduction of the first-ever bitcoin futures ETF seemed to have boosted bitcoin’s price. This is further fueled due to the sustaining inflation across major economies of the world.
The supply cap of bitcoin stays fixed at 21 million BTC. On the other hand, the USD is flexible and a five-folds growth of the United States M1 Money has been recorded over the past five years. It is undeniable that the inclination towards cryptocurrencies like bitcoin is due to the fear of inflation in fiat currencies. It leads to the suspicion that bitcoin and other cryptocurrency prices will increase due to the inflationary pressure.
However, there may not be any difference in bitcoin's fixed cap as its price is driven by its demand. People will, and have been, buying bitcoin because they perceive it as a good store of value. It is, however, unclear as to what will happen with rising interest rates.
The limited supply of bitcoin may deprive it of the edge it has over other cryptocurrencies. When compared to the safe haven of Ether, bitcoin’s cap circulation does not offer a significant advantage. The supply rules that can not be manipulated by humans provide a key advantage to crypto to work as a hedge for inflation. This way, Bitcoin savers will not have to worry about a politically motivated upsurge in supply, dropping the worth of their bitcoin savings.
Impact On The Developing World:
As we take a look at the United States and China’s soaring inflation, some questions arise. How will this affect the developing world? Will the effect be greater than that created in the developed countries? Will the poor countries adopt bitcoin as an inflation hedge? Digital currency exchangers within Pakistan have been rapidly taking off over the years, which proves that there is definitely a chance of the adoption of cryptocurrency in this region.
The impact of inflation is expected to create suffering for low-income people residing in developing countries. The impact will significantly hit the countries with weak banking systems, measuring a large number of unbanked households. Financial literacy and possession of monetary assets are some things that should be possessed by people in developing countries to be able to take advantage of Bitcoin.
E currency in Pakistan has been thriving despite global inflation. One should survey various e currency exchangers in Pakistan and explore cryptocurrency rates in the market before investing in digital currencies. This will ensure that they do not come under negative impacts of the global economy. If you are looking to buy bitcoin in Pakistan, you can visit PKR2Dollar.
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