Inflation data showed that prices are rising faster than experts expected. The latest report on the US Consumer Price Index (CPI), which was released on June 10, showed that the average hourly wages of American workers are at their lowest in the current century. Over the past 12 months, the US CPI reached 4.2%, the highest since September 2008.
The United States also saw a surge in prices for cars, transportation and hotel accommodations as businesses hardest hit by the pandemic reopened.
It clarifies that the rate of inflation has increased sharply after several years at an unusually low level. Mainly due to the recovery of the American economy. Experts attribute this situation to the fact that enterprises cannot keep up with demand.
Is cryptocurrency really a deflationary asset?
As you know, inflation is one of the main drivers of Bitcoin’s growth. Investors hedge the risks of asset depreciation in Bitcoin. The deflationary nature allows the asset to be used as a store of value without worrying about inflation negatively affecting its price. More and more analysts perceive Bitcoin as the best safe haven asset. The key element of BTC is its decentralization. Which makes it immune to the processes taking place in the traditional banking system.
It should be noted the increased demand for Bitcoin, which is manifested in the growth of the share of dominance, which added 2% during the last two sessions this week. The main cryptocurrency is trading better than the market, outperforming Ethereum, which is losing its share of capitalization at the end of the week.
Surge in US inflation in the short term
The Federal Reserve System periodically turns on the printing press and literally floods the market with money. The expert argues that the sharp increase in the money supply, observed over the past few months, provokes an acceleration of inflation.
In addition to the United States, almost all developed countries have faced similar risks. Which have launched incentive programs through the inclusion of a printing press.
In 2020 alone, central banks issued more than 25% of the world’s total money supply.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, has calculated that by December 2021 we will see an acceleration in inflation and a depreciation of fiat money. Nothing like this has happened before, the economist stressed.
He didn’t directly point to Bitcoin as an alternative in the face of the impending destabilization of the situation in the financial sector. However, he warned investors to revise their strategy and reduce the share of savings in foreign currency.
A similar point of view previously expressed the famous businessman Robert Kiyosaki. He also stated that the US stimulus program would devalue the dollar. Kiyosaki also urged investors to invest in Bitcoin and gold, which are the safest assets in our turbulent times.
Bitcoin currently has a limit of 21 million tokens. This means that at some point there will be fewer Bitcoins to buy. So, demand will lead to an increase in the unit value. In addition, investors are also transferring their investments to cryptocurrency due to limited exposure to government oversight and their distrust.