million: Bitcoin as a solution for inflation. Will Argentina adopt Cryptocurrencies like El Salvador?

Traditional, Blockchain and Crypto CFO - Member of MMBA

Can Bitcoin be the solution for inflation? Why?

Bitcoin as a solution for inflation in Argentina This is an interesting question, as I prefer to look at bitcoin as a solution for inflation everywhere. There have been unprecedented amounts of money printing by central banks, and many countries have been embracing monetary policy that is contributing to inflation. Issues surrounding supply chain and workforce, resulting from a year and a half of bad public policy, are beginning to affect consumer prices as well. The combination of these two factors alone will fuel to increased inflation. Argentina is already behind on next years outlook from an inflation and fiscal policy perspective and 40% of the population is in poverty. There are no U.S. investment dollars coming into the nation, making the outlook even more dire. Meanwhile, the volumes in bitcoin trading within the country are soaring as the number of crypto wallets has done a 10x. If the government is smart, they will take heed of this in what we will call a ‘wisdom of the crowd’ moment. Following the lead of the population, it would benefit the nation to embrace Bitcoin, and the technologies that flow from bitcoin. Creating a friendly regulatory environment, encouraging bitcoin and adding bitcoin to the national balance sheet will do for them what their current monetary policy cannot seem to do.

How Bitcoin as a legal tender could affect the crypto market if this solution is used more and more?

Should Argentina make Bitcoin legal tender while we are still in the current bull trend of this cycle, the affect on the larger crypto market would be significantly bullish. It would be reasonable for there to be a positive price impact and could lead to other countries taking the plunge with regards to embracing Bitcoin. Almost more importantly is the fact that this will create 40+ million new individually held, decentralized wallet holders. This is extremely bullish. The internet required that a ‘critical mass’ of individually held email addresses be reached in order for its’ true value to be realized. It is the exact same with the decentralized economy (internet of value). The difference is that, here, we need a critical mass of decentralized wallet holders to be reached. When this happens (and it will), the promises of Web3 and the metaverse will begin to become clear.

Investment Specialist,Crypto Currency Specialist,Analyst

Can Bitcoin be the solution for inflation? Why?

Some financial experts believe that BTC does not have a long enough history to determine that, but I think that it is necessary to take a smart risk, because based on the overall situation, it could be one of the safer solutions. By July 28, about 18.77 million bitcoins had been mined, there were only 2.23 million left to put into circulation and this is one of the main reasons for BTC to be a haven from inflation.

How Bitcoin as a legal tender could affect the crypto market if this solution is used more and more?

A lot of crypto projects were naturally tied to Bitcoin, and BTC has had an unstable path through history. Bitcoin as a legal tender turns on very quickly the accelerated stability and maturation of many crypto projects.

Thomas Matkovic

Can Bitcoin be the solution for inflation? Why?

If Bitcoin were accepted as the world's reserve currency, this could potentially create an environment that could curb inflation and introduce a moderate amount of favorable deflation until all 21 million bitcoin are eventually minted.

How Bitcoin as a legal tender could affect the crypto market if this solution is used more and more?

Bitcoin must be accepted by international financial institutions , world bank etc... before bitcoin might be in a position to become legal tender. It's not quite sure how El Salvador will deal with international pressure regarding this problem. Main idea is to use bitcoin to any debt settlement such as taxes, public or private charges and business dues. Legalizing Bitcoin as legal tender means governments will have to give sovereign backing to the cryptocurrency. Except El Salvador no other country has so far given Bitcoin, or any other cryptocurrency, the status of a legal tender. One of the major reasons for yet not legalising cryptocurrency as legal tender could be their highly volatile nature and the unpredictability of the disruption that they may cause.Legalising Bitcoin as legal tender will mean businesses must accept Bitcoin as a payment method, alongside the fiat currency – such as the US dollar, Indian rupee etc.

Full Stack Developer / Crypto / Blockchain

Can Bitcoin be the solution for inflation? Why?

Yes, as a crypto enthusiast I say, Bitcoin can be the hedge against inflation due to so many reasons. Bitcoin has a limited supply of 21 million and it is not like traditional finance in which paper banknotes can be printed according to the demand. Once 21 million bitcoin is mined, there will be no additional supply of BTC and this scarcity inspires Bitcoin to be digital gold to act as a hedge against inflation.

How Bitcoin as a legal tender could affect the crypto market if this solution is used more and more?

Recognizing Bitcoin as a legal tender means it also helps to increase the use-cases of cryptocurrencies with the increased adoption. You know, Bitcoin influences the price of so many pair strengths of the crypto in the cryptocurrency markets.

Community Case management worker, crypto trader

Can Bitcoin be the solution for inflation? Why?

The issue here is that central bank money printing will lead to inflation or the decrease in the value of money over time because the more money printed the further inflation increase as it kills the value of money thereby making goods and services price increase and create hardship for citizens. While Bitcoin, by contrast, has a fixed limit of 21 million coins that can ever be created. This limited supply allows bitcoin to resist inflation. This is why I feel Bitcoin and other crypto currencies could be solution to ending not only Brazil's inflation but world over.

How Bitcoin as a legal tender could affect the crypto market if this solution is used more and more?

It will affect not only crypto world but all other business sectors and it could be both positive and negative as Bitcoin is a highly volatile cryptocurrency that can easily change its price by 5% to 10% and even more in a single day. This creates another issue for the merchants: they will have to change the price of their merchandise very swiftly, sometimes several times per day, which may cause major inconvenience for the business model. Also Bitcoin increase always affects other crypto currencies as when Bitcoin price goes down others follow suite likewise if it goes off so not withstanding something will have to be done to check the volatility if it was to be accepted as legal tender.

ASSISTENTE DP

Can Bitcoin be the solution for inflation? Why?

Yes. The inflationary fear remains one of the main fears of the market as a whole. In Brazil, inflationary data indicate that the price surge should come to stay. And the dragon is terrorizing every country in the world. It shows its claws, flaps its wings and gobbles up the purchasing power of people everywhere. There is no escape. But there is an asset that can save everyone, a point of salvation, where the mythical beast doesn't reach. Yes, bitcoin can be considered an information-immune asset. Cryptocurrencies were born with the idea of ​​being an autonomous financial system, without the need for a central bank behind it. Thus, to put new bitcoins on the network, it is necessary to carry out the mining process. This process basically releases new bitcoins into the network, validates as transactions and makes the whole process more secure. There is no backing behind it, unlike traditional coins. In theory, CBs can only issue paper money based on a backing, in gold or dollars, as is more common. "In theory", because that's not exactly how it happens on a daily basis. Central Banks are subject to monetary policies, which can change over time. The BC can start printing more currency even without having a backing for it, which will affect the purchasing power of that money. To put it simply, the Central Bank can "create" money, but bitcoin has a possible network limit of 21 million units. Because it is a limited asset, we call cryptocurrency "deflationary". This means that the purchasing power of the currency increases over time. From the moment the last bitcoin is released onto the network, the law of supply and demand must prevail, reinforcing the deflationary characteristic of this type of asset. Inflation control is one of the issues that worries experts with El Salvador adopting bitcoin as one of the country's official currencies. As the country does not control the issuance of cryptocurrency, if it is necessary to inject more money into the economy, as the US government's stimulus program has done with the dollar, it will not be possible unless more currency is bought. Every currency undergoes fluctuations with the economy, whether of an inflationary or deflationary nature. However, there are hypotheses in which bitcoin gains purchasing power against other currencies. Bitcoin's purchasing power is still small against the dollar, but it is more constant than the US currency. In African countries, where economies are constantly shaken by inflationary shocks, the use of bitcoins is already common. Even Latin America has similar examples: Venezuela and Argentina use cryptocurrencies due to the small purchasing power of their local currencies. The tenants of these countries see that each time the Venezuelan bolivar or the Argentine peso buys fewer items. On the other hand, bitcoin is still valued and worth a lot, despite the fluctuations. Unlike other assets, such as cryptocurrencies, they have not yet suffered their “fire test”, surviving various economic scenarios. Despite this, experts remain optimistic about the use of bitcoin as a store of value and portfolio diversification to keep inflation from rising in recent times.

How Bitcoin as a legal tender could affect the crypto market if this solution is used more and more?

It will be through Central Banks around the world that Bitcoin will be able to see its price soar in the market. The moment that government agencies apply in Bitcoins would seal an expansion of the decentralized market. With these banks investments in digital assets, the cryptocurrency should experience a sudden increase in its price. The Central Banks of several countries can start accumulating Bitcoins as a kind of reserve, it would be a “digital gold fever”. This moment should make the Bitcoin price soar and reach unimaginable values.

Guru

Can Bitcoin be the solution for inflation? Why?

Hardcore Bitcoin enthusiasts say the digital coin is the world’s best hedge against rising consumer prices. The logic: Unlike U.S. dollars or any other normal currency, it’s designed to have a limited supply, so it can’t be devalued by a government or a central bank distributing too much of it. Almost every bull case on Bitcoin has looked prescient lately—the cryptocurrency is trading at around $57,000 a coin, up from about $5,000 a year ago—so that’s added some buzz to this inflation story. With the economic outlook perking up, Covid-19 cases falling, and greater amounts of fiscal stimulus on the horizon, investors in all kinds of assets seem to expect a bit of a rise in prices. But that’s coming from a very modest base. Over the past year, the inflation rate in the U.S. has been 1.7%. And then there’s the question of whether the digital asset would really act as an effective hedge. It doesn’t have a long enough history to establish that, says Cam Harvey, senior adviser to Research Affiliates and a professor of finance at Duke University. Theoretically, if investors come to regard it as similar to gold, Bitcoin might hold its value over a very long term—as in a century or more, Harvey says. In their research on gold, he and his colleagues have found that it has held its value well for millenniums. But they also found that it’s prone to manias and crashes over shorter periods. (Gold, notably, is down 9% this year despite all the inflation talk.) Bitcoin too has swung wildly in its short life, for reasons barely connected to anyone’s view on inflation. “What’s going to happen to Bitcoin? It’s really unclear,” Harvey says. “The price is not just driven by the money-supply rule, it’s driven by other speculative forces. That’s why it’s multiple times more volatile than the stock market.” It’s conceivable that a bout of inflation could have the opposite of the expected effect on Bitcoin. If inflation induced a recession, for example, investors might respond by stepping away from riskier assets such as cryptocurrencies. relates to Don’t Count on Bitcoin to Be a Sure-Thing Inflation Hedge Ark Investment Management’s Cathie Wood says she’s as concerned about deflationary forces as she is with inflation.PHOTOGRAPHER: ALEX FLYNN/BLOOMBERG In recent weeks, when investors concerned about inflation pushed the 10-year Treasury yield from 1.34% to as high as 1.62%, Bitcoin suffered its worst drop in months. Crypto proponents argue that Bitcoin traders long ago anticipated bond yields would rise—and a subsequent spike in yields did roughly track with a bump in crypto. Still, Bitcoin’s recent moves bear at least a passing resemblance to more straightforward speculative trades. Bitcoin has received a stamp of approval from more than a handful of notable Wall Streeters, including veteran hedge fund manager Paul Tudor Jones, who say they like it as a store of wealth. “That is certainly an element that has driven investment by institutions, particularly in the wake of the ways in which policymakers have worked to jump-start the economy” after the Covid slowdown, says Michael Sonnenshein, chief executive officer at Grayscale Investments, which runs a fund that holds Bitcoin. “Certainly we have no shortage of global macro investors for whom adding Bitcoin has acted for them as a hedge for inflation.” Bitcoin’s strongest advocates see its rising price as an early-warning sign that the traditional financial system is vulnerable, and argue that the cryptocurrency could rise further as investors look for a haven. Such arguments hinge on the idea that inflation won’t just edge up with a growing economy, but could explode as a result of so-called money printing. The Federal Reserve doesn’t change the money supply by literally printing bills. However, a measure of the amount of money in the financial system known as M2 has increased, thanks in part to accommodative policy. Fed Chairman Jerome Powell said in recent congressional testimony that the growth of the money supply no longer has important implications for the economic outlook. “We’ve had big growth of monetary aggregates at various times without inflation,” he said. “So it’s something we have to unlearn.” Jim Paulsen, chief investment strategist at the Leuthold Group, agrees. While there may be more money, its velocity—or the frequency with which money changes hands—has dropped off. That’s a crucial factor because it shows money is being saved rather than spent, which keeps price pressures muted. But even if velocity turns higher, offsetting disinflationary forces could still come into play, including an aging population and digital technology’s propensity to push prices down. “Inflation is turning up a little bit, but I don’t think that means that crypto is going to go nuts,” Paulsen says. Bitcoin is unlike most other inflation hedges. Its value is based entirely on other people’s willingness to hold it: The digital token isn’t tied to any other asset, such as oil or real estate or earnings from a business, that might naturally rise in value along with consumer prices. It’s possible that inflation could go up and it’s possible that Bitcoin could too, but the two aren’t necessarily linked. One of Bitcoin’s best-known bulls, Ark Investment Management founder Cathie Wood, said in a recent webinar that she’s as concerned about the forces of deflation—or falling prices—as she is with inflation. “The kindling wood for inflation exists,” says Marc Chandler, chief market strategist at Bannockburn Global Forex. “One has to make a judgment about whether there’s sufficient spark.” Instead of looking at Bitcoin prices as a weather vane of inflation, he prefers to look at signals such as oil prices, shipping costs, or the price of semiconductors. They’re all rising as the economy gains steam, but that doesn’t mean the dollar’s being undercut by a flood of printed money. “The high priests of the cryptocurrency space look for any reason to help their case,” he says. “I’m still hesitant to think that Bitcoin tells us anything about high-frequency economic variables.”

How Bitcoin as a legal tender could affect the crypto market if this solution is used more and more?

Price fluctuations in the bitcoin spot rate on cryptocurrency exchanges are driven by many factors. Volatility is measured in traditional markets by the Volatility Index, also known as the CBOE Volatility Index (VIX). More recently, a volatility index for bitcoin has also become available. Known as the Bitcoin Volatility Index, it aims to track the volatility of the world's leading digital currency by market cap over various periods of time.1 Bitcoin's value has been historically quite volatile. In a three-month span from October of 2017 to January of 2018, for instance, the volatility of the price of bitcoin reached to nearly 8%. This is more than twice the volatility of bitcoin in the 30-day period ending January 15, 2020.1 But why is bitcoin so volatile? Here are just a few of the many factors behind bitcoin's volatility. Bad News Hurts Adoption Rate News events that scare bitcoin users include geopolitical events and statements by governments that bitcoin is likely to be regulated. Bitcoin's early adopters included several bad actors, producing headline news stories that produced fear in investors. El Salvador made Bitcoin legal tender on June 9, 20212. It is the first country to do so. The cryptocurrency can be used for any transaction where the business can accept it. The U.S. dollar continues to be El Salvador’s primary currency. Headline-making bitcoin news over the decade or so of the cryptocurrency's existence includes the bankruptcy of Mt. Gox in early 2014 and, more recently, that of the South Korean exchange Yapian Youbit. Other news stories which shocked investors include the high-profile use of bitcoin in drug transactions via Silk Road that ended with the FBI shutdown of the marketplace in October 2013.3 All these incidents and the public panic that ensued drove the value of bitcoins versus fiat currencies down rapidly. However, bitcoin-friendly investors viewed those events as evidence that the market was maturing, driving the value of bitcoins versus the dollar markedly back up in the short period immediately following the news events. Bitcoin's Perceived Value Sways One reason why bitcoin may fluctuate against fiat currencies is the perceived store of value versus the fiat currency. Bitcoin has properties that make it similar to gold. It is governed by a design decision by the developers of the core technology to limit its production to a fixed quantity of 21 million BTC. Since that differs markedly from fiat currency, which is dynamically managed by governments who want to maintain low inflation, high employment, and satisfactory growth through investment in capital resources, as economies built with fiat currencies show signs of strength or weakness, investors may allocate more or less of their assets into bitcoin.

Student

Can Bitcoin be the solution for inflation? Why?

BITCOIN How Inflation Is Stealing Your Money: Can Cryptocurrency Solve Inflation on a Global Scale? PUBLISHED APR 7, 2016 12:55PM EDT How Inflation Is Stealing Your Money: Can Cryptocurrency Solve Inflation on a Global Scale? | NASDAQ This is a guest post by Chris Pardo and the opinions expressed are those of the author and don't represent the views of Bitcoin Magazine or BTC Media. Inflation is one of those read-the-small-print kind of taxes that people don't often think about even though it can have a major impact on their finances and, thereby, on their lives. Rising long-term inflation is more insidious than you might think because it can steadily and most assuredly decrease the value of your earnings/savings - especially, if your taxes aren't indexed to compensate you for the cost of inflation. Inflation has always been the bane of many businesses and individuals alike. One thing is clear: something needs to be done. If cryptocurrency, perhaps Bitcoin, was globally accepted as the world's reserve currency, how well could it manage inflation and provide transparency compared to the U.S. dollar, arguably the world's primary reserve currency ? The world of fiat currency seems straightforward enough: Delegate monetary policy to those elected officials most capable of keeping a standardized and stable medium of exchange going. In practice, however, things get complicated, and often the policies and the mechanisms to carry out the policies are convoluted and not as transparent as they could be. For example, the Federal Reserve System (the Fed attempts to manage inflation by using open market operations , the discount rate , and reserve requirements , but this monetary system has not been able to reduce long-term inflation. Much of this instability in the money supply is due largely to the practice of fractional-reserve banking/lending by commercial banks and lenders and the Fed's imprecise, volatile way of increasing and decreasing the money supply by using bond transactions, discount rates and reserve requirements, which ultimately swings the economy and the money supply exponentially upwards or downwards. With the current monetary system, regardless of how well the Fed tries to plan bond transactions, discount rates and reserve requirements to regulate the money supply, the practice of fractional-reserve banking/lending exponentially compounds the effects produced in response to even the slightest changes made to the money supply using the Fed's three primary monetary tools. Currently the Fed's policy on fractional-reserves requires banks and lenders only to keep meager reserves ranging from 0 to 10 percent, which allows banks to create upwards of 90 percent of their money out of thin air. Think back to the movie "Dumb and Dumber" with the suitcase once flush full of cash that Lloyd and Harry plan on returning to its owner - but they later ended up spending most of the money - leaving behind a pile of napkin IOUs instead. Our current situation is similar to this, but worse; the banks/lenders create upwards of 90 percent of their money by printing digital bank IOUs without there being any cash, "special" Treasury Department/Federal Reserve IOUs , to back up all of the commercial banks'/lenders' funds to begin with. Also, the fact that banks can charge interest on monies created through this process and often require people to pledge real , tangible assets as collateral for these bank IOUs is another issue altogether. But for the purposes of this discussion, the volatility created through managing money in this way seems to ultimately result in rising long-term inflation. In addition, considering the dollar is the primary world-reserve currency, this status creates a unique situation that allows the United States to print excess reserves beyond its domestic needs to help supply the international demand. The excess reserves created in this process can, in turn, potentially distort the very indexes used by the Fed to help manage the money supply, thereby creating a fairly unstable system for managing inflation in the long run. Perhaps it is time to transition to an alternative medium of exchange that is more transparent and effectively manages short- and long-term inflation. Cryptocurrency may be a solution to regain the value of our savings/earnings on a global scale. If Bitcoin were accepted as the world's reserve currency, this could potentially create an environment that could curb inflation and introduce a moderate amount of favorable deflation until all 21 million bitcoin are eventually minted. In fact, a small amount of deflation can actually be a good thing - as suggested by the Friedman rule - and bitcoin would be deflationary until the fixed number of coins are finally minted over the course of time. Because Bitcoin is gradually minted at decreasing fixed rates determined every four years, it creates a deflationary effect, despite there actually being an increase in the money supply during this time which most traditional economists would recognize as a condition of inflation.

How Bitcoin as a legal tender could affect the crypto market if this solution is used more and more?

These characteristics make Bitcoin fundamentally different from a fiat currency, which is backed by the full faith and credit of its government. Fiat currency issuance is a highly centralized activity supervised by a nation’s central bank. While the bank regulates the amount of currency issued in accordance with its monetary policy objectives, there is theoretically no upper limit to the amount of such currency issuance. In addition, local currency deposits are generally insured against bank failures by a government body. Bitcoin, on the other hand, has no such support mechanisms. The value of a Bitcoin is wholly dependent on what investors are willing to pay for it at a point in time. As well, if a Bitcoin exchange folds up, clients with Bitcoin balances have no recourse to get them back.

Sans profession

Can Bitcoin be the solution for inflation? Why?

Specifically, bitcoins are immune to M0/MB inflation, meaning that the money supply itself does not inflate, except at the very beginning while the original 21 million BTC get distributed via the mining process. Once 21 million coins exist, they become deflationary since no new coins are issued and, as naturally occurs, money falls out of circulation as wallets are lost.

How Bitcoin as a legal tender could affect the crypto market if this solution is used more and more?

Bitcoin continues to ride waves of popular interest and market volatility. But behind the swings is an unwavering reality: The largest species of cryptocurrency doesn’t measure up to its promised benefits as a peer-to-peer network, a uniquely quick and efficient payment system, or a store of value. Bitcoin’s risks, meanwhile, are sizable. The creation and use of Bitcoin have been associated with a concentration of power among relatively few operators and owners, high energy consumption, market opacity, significant price volatility, and illicit and illegal transactions.

Professional cleaner

Can Bitcoin be the solution for inflation? Why?

Yes bitcoin is a wonderful solution against inflation. With a set max supply of 21 million (20 of which have already been mined) You will never be able to just create more Bitcoin. Another reason bitcoin stands a great chance against inflation is its halvening process. Roughly wvwry 4 years the bitcoin block reward splits in half. When BTC was created the block reward was 50 BTC then 4 years later it dropped to 25, then 12.5 and currently only 6.25 BTC are newly generated over an average 10 minute span. The last 1 million BTC are going to take roughly 150 years to mine... 40% of USD in circulation was created this past year. When America needs money we just print it.(Money Printer Go Brrrrr!

How Bitcoin as a legal tender could affect the crypto market if this solution is used more and more?

The more people own the less there is for sale. This drives the price higher and higher. If noone wants to sell their Bitcoins then pretty much it is worth whatever someone is willing to pay!

This is not a financial advice. Please do your own research and consider the risks of trading cryptocurrencies.