A STRONG ASSET IN TIMES OF INFLATION – By Mickael Mosse

A STRONG ASSET IN TIMES OF INFLATION – By Mickael Mosse

From Mudassar Hussain

Unless you live in a dark cavern in some isolated place, it’s not a secret the financial crisis the world is living right now due to the Covid-19 pandemic.

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Unless you live in a dark cavern in some isolated place, it’s not a secret the financial crisis the world is living right now due to the Covid-19 pandemic. Even countries that once were economic models are out of the comfortable place of stability. 

The pandemic made every government take strict measures in terms of social order to save lives and, thus, contain the social instability that this virus meant. But this obviously had an economic cost: without people, there’s no economy. 

Only look at the global financial crisis of 2008, governments around the world were taking expansionary monetary measures to try to keep afloat given the circumstances. Right now, governments have the same task: keep their economies up and running. So they’re printing and injecting extra money into the economy since they no longer can function like they did before COVID. Take for example the UK. The Bank of England has been pumping money into the economy and in June alone, it injected £100bn to help fight the coronavirus-induced downturn. (https://www.bbc.com/news/uk-53093127).

Unfortunately, there are side effects and one of the most feared is inflation. Inflation is the one thing central banks have to keep in mind for everything, and the rest of government policies depend on this management of inflation. 

But what about you and me? How this affects us? Well, inflation erodes our purchasing power with fiat money. Prices surge and fiat value decrease. Were you planning on buying that car you always dreamed of? Or traveling to your favorite destination once the COVID restrictions are over? In an inflationary scenario, which is in the forecast due to the economic policies implemented, your fiat money might fall short because the general prices of things will rise. It’s difficult to predict how it all will play out at the end but the volatility of fiat money is certain.

Fortunately, there’s one place was money and state policies are totally independent. One place stripped of the more political debates of which policy or how much of it is good. A neutral but global system of value transfer that is open yet secure and verifiable thanks to blockchain and cryptography. That’s cryptocurrencies. https://cointelegraph.com/news/crypto-and-fiat-currencies-are-worlds-apart-here-are-the-reasons-why

But what about other commodities that are the safe place from inflation, like gold. Yeah, gold is and will keep being stable heaven to protect value from the crisis. However, it has some pitfalls like the storage of it or not being able to use it as, well, a currency. 

Cryptocurrencies do the same job as gold, and that’s why bitcoin is dubbed as “digital gold”, in protecting against unexpected crises, including loss of value or inflation. In fact, the most known cryptocurrency, bitcoin, has shown proof of being more stable than traditional markets during this pandemic, where stocks and oil have shown increased volatility. Since February, bitcoin has seen around 0.6% gains, proving that Bitcoin is a serious contender in the preservation of wealth. https://cointelegraph.com/news/bitcoin-won-as-store-of-value-in-coronavirus-crisis-hedge-fund-ceo 

Although you might have your own evaluating formulas to choose the right asset for you, it’s true that cryptocurrency is being taken more and more seriously as a hedge against inflation. And I think that if COVID can leave us with something worth remembering is the opportunity to put to the test the robustness of cryptocurrencies right now.

Mickael Mosse - Blockchain and Cryptocurrency Expert

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