Consumers around the globe and in the United States continue to feel the effects of inflation. Recent data shows that the Consumer Price Index (CPI), rose 6.2% in October compared with last year. This development further doubts the Federal Reserve’s “transitory inflation” narrative.
If inflation is 6.2%, that means your $100,000 will turn into $54,800 if it stays steady for 10 more years. The power of compounding is immense. Satoshi is in a good place right now. #Bitcoin pic.twitter.com/THtshLF1Y0
— David Marcus (@davidmarcus), November 10, 2021
The high print caused financial markets to take a hit on November 10. Investors were worried about runaway inflation, and loss of purchasing power. Major indicies fell from earlier record-highs.
This contrasts with the cryptocurrency market’s price action, where a surge of bullish momentum led to a 4.7% rise in Bitcoin (BTC), right as the CPI data was announced.
Chart for BTC/USDT 4 hours TradingView
There has been a rapid rise in inflation since 2021, leading to increasing calls for the Fed’s easy-money policies to be ended and interest rates to be raised. Many believe that the central bank is stuck in a corner, and doesn’t have any options. A rise in interest rates could make it more difficult to service the U.S. debt.
Recent statements by Larry Summers, former U.S. Treasury Secretary:
“Global financial markets seem to anticipate slow growth and low real rates over the next few years which will weaken the ability of central bankers to guide economies.”
The Fed’s primary tool for exerting market influence is the control of interest rates. It appears that there will be no other options than continuing to print money to meet ongoing challenges.
Good for crypto, bad for fiat
These developments are unique for cryptocurrency holders. The declining value fiat currencies like dollars has highlighted the potential of Bitcoin and other altcoins to act as hedges against currency devaluation or inflation.
According to Bitcoin Stimulus data, Americans who converted $1,200 of their April 2020 stimulus check into BTC would now have $12.172 worth of BTC. This is an increase of 914%.
Current value of $1,200 stimulus checks starting April 15, 2020 Source: Bitcoin Stimulus
These gains are not limited to top cryptocurrency. The entire market has experienced an influx in funds that raised the market capitalization from $190billion to $2.95trillion during the same time.
Capitalization total of the cryptocurrency market. Source: CoinMarketCap
In addition to the rise in market value, cryptocurrency holders have been awarded with many cryptocurrency “stimulus checks” in form of airdrops such as the one recently offered by Ethereum Name Service. This created a five-figure payoff for early adopters.
Participants in the cryptocurrency market have enjoyed the protection provided by assets that appreciate in value as the buying power of fiat currencies declines. This process is unlikely to slow down in the near future, even if inflation rates continue to rise.
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