The cryptocurrency market is on the rise and the demand for cryptoassets is increasing globally due to the inflation that several countries, including the United States, are experiencing.
The inflation rate in the US has increased from 1.23% in 2020 to about 5.37% now in 2021. Before the Covid-19 pandemic, inflation in the United Kingdom was 2%, but as of June 2021, it has risen to 2.5%.
In general, global inflation has risen from 3.2% in 2020 to 3.5% in 2021, according to Statista data, and is expected to settle at 3.2% in 2022, falling to 3.11% later. This number is high for those who know about trade, investment and economics.
Inflation and the rush to secure assets is the main reason for the rise in Bitcoin (BTC) and other cryptocurrency prices.
Since the US is the world's economic superpower, any change in the dollar exchange rate affects businesses. According to the researchers, the growing interest in cryptocurrencies is due to the increasing inflation of the US dollar (USD).
With inflation averaging around 2% per year, the recent stimulus spending (amounting to around $2.4 trillion) will massively push up inflation and weaken the purchasing power of the dollar.
To protect themselves and their businesses from rising inflation, many people around the world have withdrawn from the USD and sought refuge in valuable assets, most of which are stable in value or are steadily increasing in value.
People feel safe exchanging their dollars or other fiat currencies into scarce and valuable things like precious metals, gold, stocks, and more recently cryptocurrencies to avoid inflation or unstable markets.
To hedge against inflation, people are now increasingly investing in cryptocurrencies, which has led to the total market capitalization of cryptocurrencies reaching a high of $2.24 trillion.
The value of Bitcoin, the digital gold, has also increased and is currently trading above $50,000. The market capitalization of BTC has also increased from $735.995 billion to $943.51 billion in the last 30 days and is now aiming for the $1 trillion mark as USD inflation increases.
In fact, all 20 major cryptocurrencies by market cap are trading in the green, with the exception of USD Coin (USDC, - 0.05%). Both daily and weekly trading are in the green, indicating a massive bull run in the cryptocurrency market.