The economic situation is uncertain in all markets. The pandemic, the war in Ukraine, logistical bottlenecks…and now inflation has to be added to this sinister cocktail. Of course, these economic ups and downs also affect cryptocurrencies, and we tell you how inflation affects them in today’s video so that you are aware of everything if you decide to invest in cryptocurrencies.
Inflation is a process whereby, in short, there is more money circulating than the market can absorb. This causes money to lose its value and therefore everything becomes more expensive. Until the market is regulated, which is achieved, among other things, by ceasing to print banknotes and raising interest rates, it is normal to seek refuge values to prevent money from devaluing.
Safe haven securities are assets that in times of economic turbulence maintain or even increase what they are worth. Traditionally, the most sought-after safe haven securities have been works of art, precious metals (especially gold), etc…but could cryptos be a safe haven security?
Bitcoin and other cryptos have the peculiarity of being finite, which basically makes them immune to an inflation of their own. But if the money backing them falls to zero, that’s not much consolation. For the time being, and in this last year in which inflation has soared, cryptocurrencies have lost value.
However, this is not the only time this has happened and always, after major drops, cryptos in general have reached new all-time highs. This is not to say that cryptos are good to invest in times of inflation per se, but if their price falls sharply, it might be time to think about investing.