Wandering through the tweets of Crypto enthusiasts, you'll notice the fixation on inflation, particularly hyperinflation. Bitcoin investors Question any crypto investor about their concerns, and hyperinflation is likely to pop up, especially with Zimbabwe's monetary collapse making headlines. buy BTC It's easy to see why: While traditional currencies are at the mercy of central banks' printing whims, Bitcoin's supply is rigidly fixed by its protocol.
So while you can print as much money as you like, Bitcoin's supply is set in stone, which could be a boon when inflation is rampant. only 21 million coins Yet, recent weeks, marked by plummeting oil prices and money's slowing circulation, have sparked a fresh debate on looming deflation.
Now, deflation means your greenbacks gain more purchasing power, encouraging saving but potentially devaluing assets.
Now, a prominent macroeconomist posits that a deflationary 'wave' might bolster Bitcoin in the grand scheme of things.
Signs of Deflation
With global lockdowns shutting down economies, demand for goods has nosedived, even pushing oil prices into negative territory. even negative prices . Seriously.
The scenario paints a grim picture of deflation looming, spurred by a sharp decline in spending or money's velocity.
We might be staring at one of the biggest deflationary events of our times, with a significant risk of a negative CPI looming.
— Raoul Pal (@RaoulGMI) April 3, 2020
The Fed and global financial authorities are pulling all the stops to fend off deflation and consequent economic turmoil.
Raoul Pal from Global Macro Investors hints that the Fed might breach the norm and dive into negative interest rates, backed by approaching negative yields.
Despite the uncertainties, Pal believes that deflation is inevitable, with a high probability of CPI turning negative.
Could Be Huge For Bitcoin
Analysts ponder that Bitcoin's appeal might actually rise with deflation, despite its original role to hedge inflation.
Pal, for instance, explained In the current financial landscape, dollars, gold, and Bitcoin appear prudent choices, with Pal strategizing his portfolio for the medium term.
For those forecasting much farther ahead, gold and Bitcoin alone seem more viable.
Pal didn't dwell too much on his reasoning, but his inclination towards gold and Bitcoin is understandable.
Good luck.
— Raoul Pal (@RaoulGMI) April 3, 2020
The logic is that negative rates diminish the penalty for holding non-yielding assets like gold.
Why can't someone choose a zero-yield asset like gold over a negative-yield bond? and Bitcoin Jeff Booth, tech entrepreneur and author, recently told Real Vision he sees deflation aggravating global debt issues.
He explained that deflationary periods inflate the real value of debt, posing challenges for debt accumulated in earlier inflationary times.
Basically, when deflation hits, more defaults might occur, driving distrust in financial systems, leading people to asset havens like Bitcoin and gold.
I've been chronicling the crypto world since 2013. My work appears in outlets like LongHash, NewsBTC, and Decrypt. I also contribute to HTC's EXODUS team and own Bitcoin myself. For inquiries, reach out to [email protected].
