Inflation and crypto: Will the 40-year high in the US impact on digital assets?
Inflation in the US has hit a new 40-year high, rising to a staggering 8.6 per cent. Tradfi markets have undergone significant change since the last time inflation was this high, with the complexity of products and the depth of markets growing exponentially. And many investors are wondering what this means for crypto?
Cryptocurrency was not even an idea in 1982, which begs the question what does inflation and the strong possibility of a global recession mean for crypto?
Historically, global recessions have led to increased demand for assets like gold. Gold and crypto are often compared, with many observing shared characteristics between the two products. Despite there being naysayers that suggest that Bitcoin’s price (Bitcoin is currently trading at approximately US$28,000) will continue to crash as economic conditions get tougher, there is a group who believe that big market cap cryptocurrencies like Bitcoin and Ethereum will actually prove to be a recession hedge.
The simple fact is that there is not enough historical data to make an informed guess about how crypto might perform as economic conditions continue to worsen, and people’s investments into crypto should account for the uncertainty involved.
Anyone who suggests that they know how the next few months will play out in crypto markets should be treated with a great deal of caution.