Government policies and reports are not as mundane as some people would love it to be. Whatever communications the government releases have a lot of impact on the financial market. And the cryptocurrency space isn't left out. The rumoured news of inflation in America is giving hope to cryptocurrency investors and traders worldwide.
But why would inflation, an economic situation that many dread because of how much it stifles the economy and leads to increase in price of commodities and consumer goods, be a good thing?
Why would such news excite investors and traders that have witnessed massive reds in the candle sticks the last few weeks than a surgeon sees in an operating room?
The answer is simple: the inflation might be fake.
Well, the news report says that fake inflation is on the horizon, fuelled by the government. Therefore, if there is fake inflation, which leads to a drastic crash in prices of cryptocurrency, buying the dip, a time-tested cryptocurrency advises not a strategy, is more reasonable now than before.
WHAT IS HAPPENING IN THE CRYPTOCURRENCY SPACE?
The price of cryptocurrency, bitcoin specifically, has been on the downtrend for a while now, with the number one cryptocurrency falling from an all-time high of $69,000 to as low as $48,000 on cryptocurrency exchanges. But hope amongst traders and investors is for a crypto market crash in the coming months, given how fast the inflation numbers in the United States are rising.
WHAT IS THE CAUSE OF INFLATION?
The reasons for the high inflationary numbers in the United States are diverse, but one constant factor for this unplanned and impromptu inflation is the Corona virus and subsequent shut down of world economies.
The pandemic's effect still bites till now.
While federal governments around the world are working round the clock to revive their crumbled economy, many of which are standing with a crutch, the United States isn't having it easy. Consumer inflation in the United States has been on a rise for a year, prompting many to fear an unprecedented inflation in the country.
The United States, in 2021, printed 35% of the total U.S dollars in circulation right now. That is a lot of dollars printed.
Why did they print so much money?
In dealing with the economic shrinks caused by the pandemic, the United States Government had to print more money to help buffer the effect of the lockdown. Increased government spending was done to support failing businesses and keep people off the streets, and in their jobs.
This excess money-printing activity is the reason analysts and pundits expect a 6% rise in the consumer Price Index (CPI) in November.
An increase in the Consumer Price Index shows the change in price in one basket of goods in a period when compared to the price in its base period. The CPI is used to know how much inflation citizens are dealing with. High Consumer Price Index means people are unable to purchase consumer goods.
However, there are economic recovery policies and plans in place.
President Joe Biden says that the federal government will implement a $1.85 trillion spending program and cut taxes to help the economy recover from the harsh inflationary condition.
WHAT ARE EXPERTS SAYING ABOUT PRESIDENT'S BIDEN PLANS?
Financial experts and pundits in the United States are unsure if printing more money - the very act that led the economy to its precarious situation, with CPI highest in more than a decade - will solve the inflation problem.
Pundits are of the opinion that a more holistic approach is taken instead of the easy way out of printing more money.
HOW OTHER FINANCIAL MARKETS IN OTHER COUNTRIES ARE FARING
The Asian financial markets are also going through their own fair share of red candles. Japan's Nikkei 225 suffered a 1% decline. Kospi of South Korea experienced 0.65% decline, and Kosdaq 1.1%.
This decline in the Asian Market is an indication that the economic harshness is across board, and not restricted to the United States of America.
HOW IS THE CRYPTOCURRENCY MARKET RESPONDING TO THESE NEWS AND CRASHES?
The cryptocurrency market has been on a bearish run for a while, but compared to other traditional financial markets, the cryptocurrency market has been bouncing back, albeit slightly, from bearish days and weeks. This is due to the high volatility of the cryptocurrency market.
WHAT IS ROBERT KIYOSAKI SAYING ABOUT INFLATION?
Robert Kiyosaki, author of Rich Dad, Poor Dad believes that the United States government and President Joe Biden were lying about the inflation numbers, tagging it fake inflation. According to him, "Biden and the FED are pushing fake inflation."
Robert Kiyosaki has been vocal about the FED and Joe Biden and their monetary policies. Kiyosaki believes that the Biden-led administration was mishandling the economy, and the economic policies being implemented would further sink the United States of America into deeper economic troubles.
He advises that, in light of the present inflation, investors should buy and hold gold, bitcoin, silver and real estate.
He believes that the price of bitcoin is still going to crash on Redot.com and on every exchange platform.
"Ready to buy more gold, silver, bitcoin, and real estate after the crash has crashed," his tweet read.
WHAT DOES THE INFLATION DATA PREDICTIONS MEAN TO BITCOIN'S PRICE?
The predicted inflation is positive, some analysts and pundits say, for bitcoin. The crash means that bitcoin will serve as a financial hedge against inflation.
Bitcoin is touted to be a good store of value, a commodity. With inflation data skyrocketing in the United States and other countries, buying commodities that serve as stores of value is good financial advice.
So, if more people turn to bitcoin as a hedge against inflation, the price of bitcoin will surge in the coming weeks.
However, one needs to carefully look at the bitcoin dominance index to gain some perspective on how much of a hedge bitcoin still is.
Bitcoin dominance has fallen from 73% at the start of the year to over 40% as at the time of this writing.
Also, the crypto market crash has remained longer than many analysts had predicted, making many skeptical of bitcoin's "inflation hedge" characteristic.
* This is a contributed article and this content does not necessarily represent the views of sciencetimes.com
