U.S. Inflation and Money Printing Help Drive Crypto Growth

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Noted Bitcoin founder Satoshi Nakamoto predicted an event like this – a print of money unleashed by central banks that would depreciate the value of all pre-existing currency units. The United States has just announced its highest consumer inflation rate in over 30 years: 6.2%.

“About 36% of all existing US dollars were printed between January 2020 and now,” says Brett Hope Robertson, investment analyst at crypto investment platform Revix. “This means that if you don’t take your money and invest it at a rate that beats around 19% per annum, then your wealth in terms of what you could afford yesterday compared to today has technically declined. . “

Because Bitcoin (BTC) will never have more than 21 million coins in circulation, it is unable to be inflated beyond this hard cap.

In other words, Nakamoto developed BTC as a cure for inflation. In all respects, BTC has been the “inflation killer” that it has always promised to be.

Take a look at the following chart, which shows what happened to a Million Rand house bought ten years ago in Rand and BTC.

That same one million rand house, indexed to house price inflation, would be worth just under 1.5 million rand today.

Ten years ago you would have paid 1,517 BTC for this one million rand house. Today you would pay around 1.5 BTC for the 1.5 million Rand house.

“It shows the deflationary power of BTC,” says Hope Robertson. “Due to the built-in halving of the BTC inflation rate and the tight supply cap, we can see how durable assets outperform fiat currencies in times of inflation.”

Source: Revix

Hope Robertson (BHR) explains the relationship between inflation and crypto prices.

How do inflation and money printing affect the markets?

BHR: Bitcoin was born out of the 2008 financial crash when Satoshi Nakamoto set out to fix what he saw as a critical loophole in the existing financial system that had left so many destitute. Where you have central banks capable of inflating the money supply almost unrestrictedly, you are going to have boom and bust cycles. Bitcoin was designed as the cure for all of this. You cannot inflate the supply of BTC beyond 21 million coins. The proof of its maneuverability is all around us.

Measured in fiat currency, BTC has grown by around 200% per year, worsening for a decade. Of course, as more people embrace BTC, it pushes the price up, but so does the underlying economic situation of the ongoing fiat money printing. This impression drives many people around the world to convert their money into assets that protect their wealth against inflation – BTC is considered one of those assets.

The following table shows how the Bitcoin and Revix Top 10 Bundle performed, which spreads your investment evenly across the top 10 cryptos measured by market capitalization, compared to more traditional inflation hedges. Would this really be a safer bet than gold, housing, or even stocks?

Source: Revix

Not that the graph above needs a lot of explanation, but the answer is a definite yes.

Cryptocurrencies definitely outperformed traditional inflation hedges, with the Revix Top 10 bundle (+ 667%) and Bitcoin (+ 900%) beating the S&P 500 (+ 85%), the US housing index. (25%) and gold (+ 18%).

And the following chart shows how inflation destroys wealth over time.

Source: Revix

What is the impact of money printing and inflation on the crypto market?

BHR: It has had an extremely positive effect on the crypto market. Consider that BTC has increased by around 250% over the past year and Ethereum (ETH) by almost 900%.

The chart above shows how bad this inflation is. In the United States, interest earned on money in a savings account (0.3%) will barely cover 1 / 20th of the increase in the cost of living (6.2%) experienced by the United States. Average American. In other words, your money allows you to buy about 5.9% less than a year ago.

With the new hype around inflation and money printing, many investors are looking to the cryptocurrency space for yield.

Examining this space out of necessity, we find that investors are starting to see that this asset class is not only purely speculative, but has real use cases for tomorrow.

For example, the Ethereum blockchain hosts a large and growing number of applications that generate fees for miners and developers. It has become a big deal.

The same goes for other cryptocurrencies built around smart contracts, like Solana (SOL), Polkadot (DOT), Chainlink (LINK) and Cardano (ADA). Smart contracts are self-executing contracts, actually pieces of software code, that don’t require human intervention. So you can lend, borrow, earn interest, buy financial products, all with the help of smart contracts.

Bitcoin falls into a somewhat different category, as its business case is based on being a digital store of value.

These are all important characteristics in building the world of tomorrow – a digital world.

Do cryptocurrencies have inflation?

BHR: Good question. Yes, many cryptocurrencies have inflation. As mentioned earlier, Bitcoin has a fixed cap of 21 million coins. BTC also halves the amount of BTC awarded to minors every four years in an event called “halving”. This means that the BTC inflation rate is effectively halved every four years. BTC’s current inflation rate is around 1.85%.

Ethereum, however, does not have a fixed cap, but it does have a fixed issuance schedule. With the recent upgrades (EIP 1559), Ethereum actually started to burn ETH with every transaction, and with that, the network became deflationary for the very first time.

Solana had an initial inflation rate of 8% but seeks to reduce it to 1.5% per year over time. Likewise, other cryptocurrencies have different levels of inflation built into them.

Can we think of crypto investments as a hedge against inflation?

BHR: Yes. Of course, you need to make sure that the crypto asset that you are looking for inflation protection does indeed have an inflation schedule and is amenable to low inflation or is on its way to becoming deflationary.

The proof is that some cryptocurrencies have done a much better job of protecting your wealth from the ravages of inflation than most other asset classes. That’s not to say that they aren’t volatile and prone to resounding shocks from time to time.

Revix’s Top 10 Bundle, which spreads your investment across the top 10 cryptocurrencies as measured by market cap, has grown by over 620% over 12 months.

Our Smart Contract Bundle, which spreads your investment across major smart contract-focused cryptos, has grown by over 730% year-over-year.

The same goes with the Payment Bundle, which focuses on cryptos used as a means of payment. It is up more than 300% year on year.

The evidence is clear that some exposure to cryptos will give you a measure of long-term inflation protection.

Revix – no purchase fees on Revix packs

Choosing which crypto technologies to support requires a time commitment that most workers simply cannot afford.

This is why Revix, a Cape Town-based crypto investment platform, has created its crypto bundle offerings. Revix’s bundles allow investors to instantly buy a diverse portfolio of the best crypto assets by market cap.

Between November 12 and 18, you will not pay any fees when you buy the Top 10 Bundle, Smart Contract Bundle, or Payment Bundle with ZAR or GBP.

There is no easier way to use crypto to hedge against inflation while getting involved in the future of global financial systems.

Revix is ​​backed by Sabvest, listed on the JSE, and offers access to all cryptocurrencies and bundles mentioned in this article.

About Revix

Revix brings simplicity, confidence and excellent customer service to the investment. Their easy-to-use online platform allows anyone to securely hold the world’s best investments with just a few clicks.

Revix guides new customers through the sign-up process until their first deposit and their first investment. Once configured, most customers manage their own portfolio but can access support from the Revix team at any time.

For more information, please visit www.revix.com

This article is intended for informational purposes only. The opinions expressed are not and should not be interpreted as investment advice or recommendations. This article is not an offer, nor the solicitation of an offer, to buy or sell any of the assets or securities mentioned in this document. You should not invest more than what you can afford to lose, and before investing, please consider your level of experience, your investment goals and seek independent financial advice if necessary.

Presented by Revix.

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