In order to have a better understanding of this topic, let’s review some basic terms like inflation and deflation. Inflation is an increase in the price level of goods in an economy over a certain time period. Deflation is a common decrease in general price for goods for a certain steady period. Inflation can be number one national enemy for some countries, deflation is an antagonist, therefore is supposed to be good. But no, if it’s too much it can be even worse.
Why is inflation so pernicious? First of all, it affects the poor ones and the elderly (the most vulnerable layers of the population) and not in a good way. It also causes the drop in the salary of a working class. Second of all, inflation caused the rise of interest rates for lending money. The saddest of all — inflation lessens the real value of the wealth that people have amassed. So the question of the day is: can cryptocurrency become a new way to beat inflation?
Bitcoin has fixed emission, its production decreases twice it’s primary index when reaching 210000 blocks, which happens every 4 years. Satoshi understood the inflation issues, that’s why he created a safe alternative to gold.
Cryptocurrencies, that have fixed emission are anti-inflationary. The way the coins are created allows regulating devaluation. Even though national currencies are dominating in the global financial system, cryptos are cracking their way. The question of deflation is the one where they will play a dominant role.
BTC is not only a new exciting technology of money production but also an experimental way of moving away from the physical money into the digital world. Programmed emission is also an experiment with the value. The level of inflation or deflation can be set in advance, which allows building the whole money system in a predictable way.
Positioning cryptocurrency as a way of storing money can raise a question of it being able to function as an exchange tool. Currencies have to be stable for both sides to exclude risks that may occur due to price oscillations.
Due to high volatility, BTC cannot be considered the best exchange option for everyday deals
Opposed to the national currency crypto is decentralized
The value of BTC will rise until the limit is reached and the last Bitcoin is mined. It may oscillate, but it will be stable over time.
While you are thinking about whether crypto can or cannot beat inflation, the citizens of Venezuela are actively buying crypto. Trying to stop bolivar from inflating, the government of Venezuela is planning to devalue the national currency by decreasing its value by 3 zeroes.
Crypto enthusiasts can be considered followers of the third economics school. While affirmations that bitcoin will beat inflation and stabilize the global economy may sound to corky, this theory definitely has a right to exist.
Even though Bitcoin may be a perfect currency to beat inflation, there is a great chance that new currency will appear over time. There are a lot of people using crypto for purchases on the internet, but let’s face it — paying 0,0006 BTC for new shoes is kind of harsh and looks weird. The one that will motivate not only amass, but also to spend.