MCS | Inflation: Bad for USD, Good for BTC!?

MCS | Inflation: Bad for USD, Good for BTC!?

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The US consumer price index (CPI) rose 6.2% in October, the most significant increase since December 1990. Excluding the volatile energy and food sectors, major CPIs also recorded 4.6% growth, the highest since August 1991.

Even though the US Federal Reserve has announced a tapering* policy, Bitcoin is taking a position as a hedge against inflation as it has been passive in raising interest rates.

** Tapering: A strategy to gradually reduce the scale of quantitative easing, which the government has taken to cope with the economic crisis, with minimal adverse effects on the economy.*

Looking at the trend of ETFs, 18 ETFs, whose prices rise as inflation rises, attracted $35.5 billion of funds this year alone.

Inflationary pressure felt by Wall Street has reached its peak. The short-term inflation outlook for US consumers is at an all-time high.

In the aftermath of the coronavirus, governments of each country have increased their debt further through quantitative easing, releasing a lot of money into the market. However, the labor force participation rate has not yet recovered, leading to a labor shortage in the market, and rising wages is also a factor that aggravates inflationary pressure.

Depreciation of fiat currencies affects the cryptocurrency market

Many believe that inflation is expected to continue to rise until COVID-19 is overcome.

Institutional investors also prefer cryptocurrencies to hedge against inflation, and funds continue to flow in as ETF futures Bitcoin is approved.

Source: Weekly crypto asset flows by asset Bloomberg, CoinShares

The US Fed thought inflation would end in the short term, but it is said that it will continue until the middle of next year. We are looking forward to the blockchain becoming a stepping stone for growth in various fields while attracting the most attention. And it seems highly likely that more assets will flow into cryptocurrencies and will be incorporated rapidly.

There will be strict regulations due to the incorporation of the cryptocurrency system, and we hope that a reasonable and fair cryptocurrency market will be formed by finding an agreement based on this.

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Thank you!

Sincerely,

MCS Team

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