Inflation and crypto: people take control
During the last decade, and especially for those of us who live in Latin America, the belief has been built up that inflation is only limited to those countries of the so-called “third world”, or developing countries. However, the COVID-19 crisis has shown that even the major economic powers could be susceptible to accelerated price increases, generating uncertainty and jeopardizing the confidence and value of theoretically much stronger currencies.
If we take a look at the global Consumer Price Index (CPI) ranking in 2021, we observe that Venezuela, Lebanon, Argentina and Angola are at the bottom of the table. Beyond the multiple variables that may influence each particular territory, every year, every month, every day, the prices of goods and services in these countries rise above average incomes, gradually (and sometimes not so much) destroying the real purchasing power of citizens.
It is no coincidence, then, that many of these nations lead, by a wide margin, the adoption of assets such as cryptocurrencies, tokens and NFTs, constituting tools that would allow people to protect and safeguard their wealth and life savings.
Fiat currency, the money we use for everyday transactions, is often burned in our hands. Crypto assets, meanwhile, are perhaps looming as an alternative. According to recent surveys, Nigeria has 42% of its population integrated into the crypto universe, Thailand 31%, the Philippines 28% and Vietnam 27%.
States and governments can no longer turn a blind eye to it, and must resign themselves to the fact that blockchain is a train that shows no intention of stopping, that is just beginning. Turkey and India, to cite a few examples, tried a few months ago to ban transactions or even criminalize the use and trading of crypto assets. El Salvador, on the other hand, was the first country to adopt Bitcoin as a legal currency. From one side or the other, everyone is starting to put cryptos at the center of the scene.
However, and on the other scale of the pyramid, the United States approved for the first time ETF funds based on Bitcoin (BTC). Also, technology companies, such as Tesla (NASDAQ: TSLA), MicroStrategy (NASDAQ: MSTR), and Square (NYSE: SQ), acquired cryptocurrencies to add to their regular balance sheets.
According to a report by the CivicScience consulting firm, inflation worries 87% of Americans. It would be illogical then to think that this is a phenomenon that affects only the upper classes; on the contrary, in my view, it also hits vulnerable populations, since the greatest impact is experienced in basic inputs such as food, clothing and health. And the psychological effect is the same whether it is 300% or 5% per year, because as I mentioned at the beginning, I think it is a matter of trust and not so much of pure and hard numbers.
The big leap of the Blockchain to combat inflation on a global scale may seem inevitable. The reason this could be happening is simple: in the face of inflation that I think could grow parabolically, people have abandoned their passive role and taken into their hands the power to change their lives and their household economies. I believe that cryptos are the gold of the new generation, the true revolution of financial democracy and wealth redistribution.