In France and anywhere else in the world, inflation is now part of our daily life. Is it possible to protect yourself from this with cryptocurrencies? What are their advantages? Let’s look at purchasing power and cryptocurrencies in this exclusive file.
1. Inflation: what is it and why protect it?
Inflation is a gradual decrease in the purchasing power of a currency. As a result, the prices of goods and services become higher. Inflation is multifactorial, but it is often based on the amount of money in circulation.
Historically, man has sought safe havens, which would allow him to protect himself from inflation. These are assets or properties qyou tend to keep their value, or to advance it. The best known is gold: a safe haven par excellence, it was chosen to defend itself against the loss of value of fiat currencies.
Commodities are also historically seen as bulwarks against inflation. Grains, precious metals, electricity and other products necessary for human life are considered essential and therefore factors of stability. And in recent years, it is cryptocurrencies such as Bitcoin (BTC) that have begun to be highlighted as another bulwark against inflation.
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2. Bitcoin: An asset originally created to protect against inflation
To understand where this comes from, we need to go back to the history of cryptocurrencies, and Bitcoin in particular. The largest cryptocurrency was created following the subprime mortgage crisis of 2008. Satoshi Nakamoto, the mysterious creator of Bitcoin, communicated at the time of his distrust of an overly centralized system that led to this disaster. He then explained that the fiduciary currencies, managed by central banks, did not allow the consumer to have confidence.
Hence a solution considered by Nakamoto: Bitcoin. The largest cryptocurrency was designed as a reliable system that does not require the approval of centralized entities. Other mechanisms have also been put in place to protect against inflation and limit risks.
Bitcoin has a limited supply of 21 million pieces : its rarity therefore theoretically allows it to be requested, and not to do sodilute“From there to see it as a bulwark against inflation and a way to preserve purchasing power, there is only one step. But is it really like that?
👉 To go further – Inflation on the way: how will the saver pay for the crisis?
3. Can we preserve our purchasing power thanks to cryptocurrencies?
The question that arises is therefore: can you protect your purchasing power with cryptocurrencies? We asked Odile Lakomski-Laguerre, professor of economics at the University of Picardie-Jules-Vernes. According to her, Bitcoin was created by computer scientists, not economists, and it shows:
“[Les créateurs du Bitcoin] remained on the surface on the main subject of [l’économiste, ndlr] Friedrich Hayek, according to whom it would be enough to remove the banking system and the central bank to eliminate inflation“.
In reality, it is more complex, mainly because to act as a hedge against inflation, Bitcoin needs to be adopted more widelyagain according to Odile Laguerre:
“The notion of inflation means that the currency loses its value relative to the goods and services it allows to buy. […] So as long as cryptocurrencies do not allow the creation of a payment zone in which we would pay everything in cryptocurrencies, and where most of the prices would be expressed for example in Bitcoin, it makes no sense. since the concept of inflation does not exist“.
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This is not to say, however, that Bitcoin has no use as an alternative asset. For Alexandre Stachchenko, co-founder of Adan, the Bitcoin value proposition it goes beyond the conservation of purchasing power. It is a whole system that challenges cryptocurrency, and this represents, according to him, a crucial long-term potential:
“Preserving purchasing power is just the tip of the iceberg. Bitcoin is a refuge, not only against inflation, but also against a possible failure of the financial and monetary system, as well as against political arbitrariness. The long-term potential of these assets it is anti-related to the reliability of the current financial and monetary system. It is also, for Bitcoin, related to states’ understanding of what a state-independent global and digital monetary standard means.“
So why hasn’t Bitcoin become people’s currency yet? For Odile Laguerre, Bitcoin was perhaps too precursor to have been a bulwark model against inflation:
“Bitcoin may have arrived too soon. I think that financial capitalism should have collapsed completely and that we really go to another kind of system. Bitcoin arrived when financial capitalism was still in operation, so it was absorbed as an asset“.
Bitcoin is in fact related to the stock market, because it is part of a “traditional” financial system. A loss, according to Odile Laguerre:
“Unfortunately, Bitcoin has mostly been institutionalized by finance and has so far failed as an alternative monetary project. It makes sense to see a correlation between stocks and cryptocurrencies because the latter have become financial assets and now obey a speculative logic typical of the financial logic in place in the contemporary period“.
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But it must be borne in mind that the trend is quite recent, according to Alexandre Stachchenko. He remembers that stocks and cryptocurrencies have only been correlated for less than two years:
“The massive influx of institutional investors in recent years, with massive volumes, has made them import their behavior in this market. This does not limit the potential of cryptocurrencies, because it hasn’t altered the value proposition : Bitcoin is always incensurable, safe, transportable, divisible, liquid, global, all without trusted third parties“.
On the fact that environmental obscurity questions the long-term future of cryptocurrencies, Alexandre Stachchenko is formal:
“Adoption continues to grow around the world, so this is a shock, as BTC has experienced many. The fundamentals are still green“.
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