Tuesday, August 3, 2021

Let's discuss possible deflation and what it means for crypto

So, inflation is all the talk right now. Which is understandable in our current macroeconomic environment. But what if we expand our frame of reference to 5, 10 years and beyond?
I've stumbled upon an analysis of a metric on YouTube comparing inflation / deflation after world changing events of either world war or pandemic type.
What was interesting was that the recovery consequences were opposite in both cases. After a war, there's a spike in deflation which after a couple of years turns into rapid inflation, and in the post-pandemic case, there's a spike in inflation which turns into deflation after the same amount - 3 to 7 years and going stronger for possiblity decades.
What does that mean for assets? Of course in an inflationary economy, cash is trash and assets are king, whereas in a deflation value of assets all around is suppressed and cash trumps the return on assets which grow slowly, while purchasing power of cash is rising due to falling prices.
We've seen already how inversely correlated the $dxy (dollar strength index) and bitcoin are, how does one imagine a reality where hard cash is orders of magnitude higher than now?
Or is this time different, since the current amount of money printing is unprecedented?
What do you think? No shitposting here please, I'd like a grounded discussion that'll reveal both bull and bear cases for these eventualities.


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