Wednesday, May 25, 2022

The current crypto crash shows crypto as not an inflation hedge

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The cryptocurrency market experienced a significant increase due to the COVID-19 pandemic. People were scared to invest more money in traditional assets, and therefore, they decided to go with the digital ones, which are technology-driven. These cryptocurrencies are available everywhere and, therefore, very easy to use. Also, the prices of cryptocurrencies like bitcoin reached the highest prices in 2021 November. But, the hype in the cryptocurrency market was not so constant. After reaching the highest price, bitcoin started to fall on . Following the bitcoin, other crypto coins also started to decrease in prices, and therefore, the valuation of the cryptocurrency market decreased to $1.5 trillion from $3 trillion. It shows us that cryptocurrencies are exceptionally volatile asset classes, and investors’ fortune depends on the blues of the market. If there is a severe blow to the crypto space, they might lose all their money in it.

In the past five years, cryptocurrencies experienced massive price gains. It appeared that cryptocurrencies would take over any other asset in the whole world. Bitcoin became the king of the market, and it is superior to any other cryptocurrencies in terms of speculation, network effects, and hype. In a situation of geopolitical unrest between Ukraine and Russia, what is leading to cryptocurrencies? Yes, when there is selling or pressure in the cryptocurrency space, investors withdraw their money, and hence, the prices of the crypto coin fall. This pressure is on bitcoin and every other coin available in the market.

There have been many economic factors affecting the prices of cryptocurrencies over the past few days. For instance, we can say that a cryptocurrency named FTM has been experiencing a decline in its prices just because two of its developers have taken leave from the company. But, on the contrary, the rest of the cryptocurrencies face the wrath of people who were withdrawing money because of the Russia Ukraine conflict.

Reasons behind downfall!


When the cryptocurrency started to experience an increase in their prices, even in the traditional markets, Commercial believed that the traditional markets did not control them. However, these things do not remain constant for an extended period. According to the recent trends, anyone can undoubtedly presume that cryptocurrencies also get affected by the traditional stocks and real estate markets. The ongoing sell-off in the cryptocurrency space seems to result from the ongoing inflation. The inflation rate in the United States of America was as high as 7% in December 2021. It is the highest since 1982 and therefore, people or worried about it. Due to the high inflation, people invested money in cryptocurrencies, but now, that does not appear to be the right move to make.

As the stock market and the currency market from all over the world is getting a severe blow from the current conflict situation, cryptocurrencies are also on the verge of falling. None of the cryptocurrencies Experienced an increase in their prices in the past few days. It is clear evidence that cryptocurrencies may not be considered a perfect hedge against inflation in today’s dynamic world. There are specific effects that inflation will leave on the crypto space, and therefore, people may not be completely safe from inflation.

Will crypto further be affected by the market?

Everyone is very well aware of the invulnerability of inflation to the cryptos, but now people’s perspective is about to change. Earlier, investors believed that cryptocurrencies could be a haven for protection from the inflation that the central bank currencies are experiencing. But now, the facts are changing. According to the experts, it was believed that cryptocurrencies are better than even gold, but now the situation does not seem to favour crypto coins.

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The institutional interest of the investors is still in the cryptocurrencies, but they want something much superior to the existing coins. Nowadays, the existing coins are at the mercy of the traditional market, which is not suitable for investors. Also, the experts’ predictions are not getting it right about what is happening in the market. Earlier, the market was not moving with the traditional market, but things are entirely different now.

Read: Biostar releases powerful Crypto-machine with Eight Radeon RX 6600 GPUs

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Rahul Roy
Rahul Roy
I am a computer guy by profession and a sports fanatic by choice.


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