The outbreak of COVID-19 has led to a significant decline in economic growth. The recent economic challenge is associated with inflation that was triggered by governments printing more money to offset the negative impacts of the pandemic. Probably, this is the reason for such striking interest in the crypto market as it is inflation-friendly.
The impacts of COVID-19 are not only limited to changing the social dynamics of life such as mandatory face mask-wearing, social distancing and others, but also dramatic recession in the global economy.
According to the IMF March global economic outlook 2021, economic growth across nations of the world is expected to decline to 6% and further to 4.4% in 2022. At the moment, pretty much every sector is either witnessing all-time inflation highs or very close to hitting them. For instance, last month, the inflation rate in Turkey had plunged over 16% and the Turkish lira had lost tremendously against the USD, as per the report by CoinIdol, a world blockchain news outlet.
Inflation will slow down the global economy further, frustrate citizens, lead to company shutdowns and a major economic crisis.
There is crazy currency printing going on with commercial banks all across the world to absorb the pressures exerted by the virus. However, the more money printed, the higher prices will go and the lower the value of the currency will fall.
It might sound sarcastic, but the crypto market is anticipated to thrive amid hyperinflation because cryptocurrencies do not have inflation. Bitcoin and Dogecoin are two examples of cryptocurrencies that witnessed unbelievably crazy upward trends in recent times even when real-world economies were at their lowest growth rates.
Unlike fiat currencies whose supply is determined by the existing economic and political atmospheres and regulated by the central bank, cryptocurrencies, on the other hand, are decentralized and have a fixed supply over time. Taking bitcoin, for instance, there are 21 million bitcoins that can be mined. Apparently, only about 18.5 million bitcoins have been mined already. It is still more than a century till all the bitcoins will be exhausted. After then, it is also possible that the bitcoin protocol could be modified to accommodate even more supply.
It is, therefore, without doubt, that cryptocurrencies will remain safer from inflation and the traditional market conditions. This could explain part of the reason that large banks, business people and corporations have taken the initiative to invest in crypto lately.
While the global traditional economy is undergoing major tragedies as a result of the outbreak of COVID-19, the crypto community is not worried about inflation and any such economic shocks. In fact, conditions such as inflation are somewhat good for cryptocurrencies due to their limited supply, decentralization and digital form. This partly explains the recent surge in crypto investment all across the world by the world’s rich, banks, and large corporations.