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US inflation up by 6.2% – Implications for crypto investors

Inflation

TL;DR Breakdown:

  • US inflation increased by 6.2% since last year. 
  • At this rate, the US dollar will lose half of its value in 10 years. 
  • Bitcoin and Ethereum are being seen as a hedge against inflation. 

Inflation has hit the highest point in more than three decades in the US. According to the US Labor Department, the consumer price index increased by 6.2% in the past 12 months, which was worse than anticipated. The prices of everyday products ranging from gasoline and groceries to health care and rent are significantly up from last year. 

On a monthly basis, the consumer price index soared 0.9% in October, and it’s also projected to keep going upward throughout November and December. If this inflation rate remains steady for the next 10 years, the US dollar could lose half of its value. 

This continuous spike in inflation is caused by supply chain disruption and labour shortages. The global economy hasn’t still recovered from the financial impact of Covid-19. Supply chain issues mean that products like cars and furniture are becoming more expensive. 

On the other hand, growing labour shortages are increasing the service-industry price tags. However, the average household income hasn’t increased at such a rate to keep up with the inflation. 

Inflation

How does inflation impact the crypto industry? 

When Satoshi Nakamoto first invested in Bitcoin, his vision was to see cryptocurrency as a hedge against inflation. The current global economic state is suggesting that Satoshi’s vision might not be far off. 

When inflation rises, the value of money declines. To overcome this recurring issue, people invest in assets that are almost certain to grow in value at a higher rate than inflation. So, this helps investors to keep the net value of their investment positive, even when inflation is decreasing the value of their savings. 

Leading cryptocurrencies such as Bitcoin and Ethereum are being seen as such assets. Bitcoin is up by almost 330% since last year. Lately, the leading cryptocurrency in the industry has been showing tremendous support from investors. Bitcoin has been experiencing wider adoption, which indicates a very positive future for BTC holders. 

Earlier this week, Apple CEO Tim Cook announced that he holds both Ethereum and Bitcoin. A number of US politicians have started taking their paychecks in Bitcoin. Also, El Salvador has recently made Bitcoin their national currency, and its adoption has been surprisingly positive thus far. 

On the other hand, Ethereum is almost up by 950% since last year. Ethereum is also the biggest blockchain network in the industry, which hosts many other popular cryptocurrencies. The announcement of Ethereum 2.0 indicated that the second large cryptocurrency will move to a Proof-of-Stake mechanism, which will eliminate the environmental concerns regarding crypto mining. 

All of these factors indicate that major cryptocurrencies like Bitcoin and Ethereum will continue to become valuable store-of-value assets like gold. So, as inflation rises, more and more investors will continue to enter the crypto industry. 

Mohammad Shahid

Mohammad Shahid

An IT and Cybersecurity graduate with specialized knowledge of cryptocurrency and blockchain, Mohammad joins the Repo elite team. He has worked on several blockchain development projects and is an enthusiastic crypto trader.

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