Inflation has not been this high in ages. In November last year, consumer goods and services became 5.2% more expensive, and this percentage will probably not look much better in December. In short, the euro is decreasing in value. In 2022, the expectations regarding inflation are not too good either. For example, Rabobank expects an average inflation rate of 3.8%. Besides the euro, it is not much better on the other side of the big puddle. For example, Reuters wrote this week that inflation of 7% is expected in the United States in the first quarter of 2022. In short, simply keeping cash in a savings account is a bad idea for many investors. Then it just evaporates.
The economic definition of inflation is that the purchasing power of a currency decreases. The 2 euro coin in your wallet can buy less and less things like bread as inflation continues. According to traditional economists, some inflation is positive as it encourages consumers to spend money that keeps the economy going. But with such percentages it starts to get hot underfoot. Bitcoin offers a way out in this regard because, like gold, it is a scarce asset class. There will never be more than 21 million bitcoins in circulation. In addition, there is the fact that the amount of new bitcoins flowing into the market continues to decrease over the years due to the so-called halving events. Something that PlanB's Stock-to-Flow model is based on, for example. The stock of bitcoin is still growing and in principle you can say that bitcoin therefore also has inflation. With the current rewards for miners, however, this inflation is only 1.8% and that so each halving event decreases further. However, assuming that the demand for bitcoin continues to increase in the coming years as it becomes more and more used for transactions and as a store of value, the purchasing power of bitcoin will increase. In that case, bitcoin will become deflationary. This and the fact that no one has control over Bitcoin is reason for Ray Dalio to make the cryptocurrency part of his portfolio. Bitcoin is a revolution that is far from finished. It is revolutionary technologically, socio-economically and financially. To really understand it you need to understand all the different layers of Bitcoin. A good starting point is the book “Layered Money: From Gold and Dollar to Bitcoin and Central Bank Digital Currencies” by Nik Bhatio. Right now i am bullish on a few projects like: Rise up and Spores. Im very glad I've found them. DYOR!
No comments:
Post a Comment