The state of the global economy appears to be deteriorating. The years of financial boom after the 2008 crisis ended with the outbreak of the COVID-19 pandemic in early 2020. Social distancing measures and “stay at home” rules severely crippled production, while many central banks took it up. The decision to print fiat currencies in large quantities in an attempt to plug economic loopholes.
Two years later, the move (along with the Russo-Ukraine War and its financial consequences, along with other economic crises, such as supply chain issues, rising demand and production costs) caused inflation to rise in many countries. In March, inflation in Turkey reached a year-on-year record high of 61.1%. Countries like America and Britain also suffered serious losses.
When inflation rates were rising so rapidly during the ’80s, most people invested their depreciating fiat currencies in something that could maintain its value in the future, such as real estate or gold. Nowadays, however, we have cryptocurrencies, and some residents of affected countries are already interested in diversifying with the asset class.
Major Economies Take a Major Inflation Punch
Considering the worldwide financial crisis, it is worth starting with the strongest economy – the United States. In April this year, the Consumer Price Index (CPI) reached 8.5%, a record high in the past 40 years.
The reason behind the negative figures could be the Federal Reserve’s decision to print trillions of dollars during the coronavirus pandemic and rising electricity and gas prices due to the military conflict between Russia and Ukraine.
But all this is not so simple, because these issues started even before the war in Europe. Supply chain problems were already hurting the local (and global) economy and had only escalated over the past few months. Raw materials and labor are hard to find, which results in fewer products being produced and fewer goods, while demand remains the same or perhaps even increases.
The effects are more than they appear. And while transportation, shelter, food, and all other costs rise daily, it takes time for people’s wages to reach the level needed to cope with the unrest. As such, many individuals began to look for solutions, and those who had the experience and financial capabilities, divided some of their wealth into precious metals, assets, bonds, stocks and digital assets.
Many financial experts and crypto proponents have described bitcoin as the digital version of gold and a successful hedge against inflation. Paul Tudor Jones, Ray Dalio and Jordan Peterson are some examples. The narrative that BTC can serve as a suitable anti-inflationary tool comes from its limited supply (only 21 million coins exist), accessibility and decentralization (it is not printed or controlled by central banks).
The accessibility feature is particularly interesting as some of the above assets are generally regarded as safe havens that BTC is not easy to access. All users have to do is gain access to the Internet on the bitcoin blockchain, and, if they choose to go through centralized exchanges, they can create accounts and get verified quickly. Investors can also buy BTC in very small amounts (they do not need to buy the whole one).
Weighing in on the matter, bitcoin bull Michael Sayer recently argued that the inflation rate in the US is actually higher than what the authorities declared, advising people to take shelter in the primary digital asset.
#inflation worse than you think, and #bitcoin You are better than you know.
— Michael Saylor⚡️ (@saylor) 12 April 2022
The next country where inflation reached a 40-year peak is the United Kingdom. In addition to the reasons mentioned above, the country’s withdrawal from the European Union fueled a local crisis, known as Brexit. Experts believe that the cost of living in the UK is likely to rise due to its disrupted financial ties with the rest of Europe.
A recent Coinbase report showed that cryptocurrency adoption in the UK is on the rise as 33% of Brits have already entered the asset class. Bitcoin and Ether are the most owned, while Dogecoin and Binance Coin are in the top 4.
Record inflation reigns in other countries
In April, the largest country by land in South America – Brazil – reported the sharpest rise in inflation for a month, when the consumer price index (IPCA) rose from 11.04% in March to 12.1% 30 days later.
According to Gemini’s survey, in light of the financial turmoil, Brazilians are the global leader in crypto adoption, with 41% of participants admitting to owning bitcoin or altcoins.
The inflation rate in Nigeria is also moving northwards every month, and currently, it stands at over 16%. Interestingly, KuCoin estimates that there are over 33 million crypto investors (35% of them aged 18 to 60) in one of Africa’s financial centers. Aside from inflationary fears, a large proportion of Nigerians distribute their wealth in the cryptocurrency market as they have limited access to financial services.
Despite the negative trend in all these countries, the inflation crisis in Turkey appears to be getting worse. Late last year, the country’s national fiat currency – the Turkish lira – lost a significant portion of its value against the US dollar. Many blamed President Erdogan, whose controversial policies may have led to the sharp decline.
In March this year, the inflation rate in Turkey exceeded 60% (year-on-year). Gold remains the most important and widely employed investment instrument in the country, but there could be a problem with it as the official government urged the population to turn to their precious metal holdings to help support the economy.
At the same time, locals are slowly shifting their attention to bitcoin and even Tether, as it is pegged 1:1 with the USD, making people the closest available alternative to the greenback to buy on the blockchain. can.
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