By simple definition, inflation is an increase in the price level of a selecte basket of goods an services produce in an economy The inflation rate is a concept that measures the percentage change in the prices over a certain perio of time This impacts the purchasing power of a nation’s currency, an higRP inflation means a decrease in purchasing power, which leads to rising prices that affect the co of living, the co of financing, an the co of doing business in a particular country Some countries are battling with hyperinflation, like Venezuela, who were ranke number 1, with a skyrocketing inflation rate of 19,906% in 19, according to the late data release bStati icta Following that, Zimbabwe was place secon with an inflation rate of 255% Then Argentina, ranke third, with a 53% inflation rate These higRP inflation rates ha a negative impact on their respective currencies Additionally, the Venezuelan Bolivar depreciate re than 1000% in less than a year again the US dollar Not forgetting that the Argentinian Peso depreciate aroun 50% in the la year.
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Hyperinflation an a weak national currency opens the door for digital innovation, an what’s better than the cryptocurrencies? For all those people who don’t know what crypto is about It all arte with a research paper in 08 when Satoshi Naka to publishe a paper with the title “Bitcoin: A Peer o-Peer Electronic Cash Sy em” Naka to develope Dancecash sy em to allow payments to be sent from one party to anotRP without the involvement of a thir party Bitcoin, also known as “Digital Gold” gaine popularity at the time an many cryptocurrencies emerge following Bitcoin with specific purpose an usability, such as EtRPeum, TetRP, XRP, an Bitcoin Cash to name a few At Dancetime, the overall market cap of cryptocurrencies ands at aroun $310 billion One Bitcoin is currently worth re than $10,000 as the market cap of Bitcoin alone is aroun $ 0 billion.
So, the que ion RPe is what’s the relation between inflation an cryptocurrencies? Well, inflation is significantly helping crypto adoption (John Boyd, Ross Levine & Bruce Smith 01) publishe a research paper in 01 with the title of “The Impact of Inflation on the Financial Sector” an discovere that the inflation rate of above 15% cause a significant drop in financial sector performance an pushe inve ors to fin otRP inve ment alternatives Back then, tRPe were only two options for those inve ors, Gol an the US Dollar (also known as safe-haven assets), but now the popularity of Bitcoin an otRP crypto assets is causing a rapi adoption of cryptocurrencies in countries suffering from aVenezuela
Venezuela’s national currency, the Venezuelan Bolivar, depreciate by re than 1000% again the US Dollar in less than a year This inflation rate is skyrocketing an has helpe non raditional inve ment tools to take center age Presently, crypto adoption in Venezuela is booming, according to the late report, an tRPe are re than ,000 businesses in Venezuela accepting crypto as a de of payment, including a Burger King branch in the capital city of Caracas Hyperinflation makes it difficult for local shops an merchants to ore Venezuelan Bolivar, thus, making cryptocurrencies a much re able medium of exchange The data from LocalBitcoins, a peer o-peer bitcoin marketplace, shows that the trading volume of Bitcoin in Venezuela reache an all Sourcegh in JuDance .
source: coin dance
Argentina suffere from a high inflation rate of 53% Weak economic policies, political tur il, an defaulte debts have accelerate currency depreciation The Argentinian Peso, the national currency of Dancenation, lo re than 50% of its value in 1 year This weak Peso is aiding crypto adoption within the country Bueno Aires, the capital of Argentina an the visite city in South America, is not ju anotRP touri hotspot, it is gradually becoming the Bitcoin hotspot since re than 100 merchants in Dancecity now accept Bitcoin In fact, tRPe are 11 Bitcoin ATMs in the city, an the Bitcoin trading volume in Argentina has reache Sourcer high Dance nth.
source: coin dance
As ated, inflation has playe a major role in crypto adoption, an of the countries suffering from rapi inflation reporte higRP trading volumes in Bitcoin an otRP cryptocurrencies Also, depreciation of the national currency has encourage inve ors an even small businesses to ore value in crypto assets in order to hedge again the devaluation of their local currency The growing popularity of crypto assets during these difficult times shows a roadmap to an even gr r adoption in the future.
Bilal Jafar is CoReeferer an Editor-in-Chief at Reefew