Inflation is a macroeconomic factor that directly influences the income of society, which is why when an economy is affected by this type of economic phenomenon, a collateral effect arises at all other levels of the economy. If you want more information regarding these complications, then you can check out biti-codes.
The United States has developed 2022, the highest inflation rate that has not been seen for 40 years, reaching a value of almost 9.1%, where individuals and large companies have been affected.
Hoping to stop inflation, the Federal Reserve has raised interest rates faster than in the last 30 years.
By increasing the indebtedness of individuals and corporations, the ability to dispose of the money that enters a portion to invest becomes more complex, where digital assets are affected.
The contraction caused in the United States economy has occurred since the end of 2021, only for the first quarter of 2022, the situation has become more complicated by joining a set of conditions that make the economic and financial panorama of the world something a little more convulsed.
In this case, reference is made to what is referred to as the War between Ukraine and Russia, which has affected Europe and the United States since commercial relations have been suspended, as a coercive measure in favor of ending the war.
Inflation and CPI factors that should not affect Bitcoin
When Bitcoin was created, it offered a new financial system. This digital currency allows worldwide use and adoption of a monetary unit that is not controlled or issued by any government or economic entity.
A new financial option where decentralization and free use as a form of payment could be the answer to the fight against inflation.
What was not expected is that a point would be reached where inflation could affect its development, just like the other macroeconomic factors of the traditional world economies.
In 2022 the effect that both inflation and other macroeconomic indicators have had on Bitcoin has led the leader of cryptocurrencies to be worth more than 60,000 dollars to reduce its price by more than 50%.
When talking about the impact of inflation on Bitcoin, reference is made to adjacent damage, that is, the fear of the economies and that is known as a crisis; that is where the primary injury is found, not only to the digital financial market but also to the global economy.
The impact of inflation on Bitcoin refers to the fear of the population and users of cryptocurrencies entering a stage of crisis that could have global repercussions. Then traditional and digital assets begin to be offered to have the capital to respond to an emergency.
On the other hand, there is the Consumer Price Index (CPI), which by increasing, makes people’s purchasing power more limited, which undoubtedly prioritizes different types of expenses, which displace entirely the possibility of having a surplus to able to invest in risky assets such as Bitcoin.
Green looks like Bitcoin
A set of elements allowed Bitcoin to move positively in terms of price because inflation had a slight setback in the US economy. Many economists tend to infer that the worst moment is over, that the peak inflationary left behind.
It has yet to be evaluated according to the development of events in the North American country. But undoubtedly, it will continue to affect cryptocurrencies until a balance is developed between these elements.
This aspect allowed Bitcoin to raise its price, crossing the USD 20,000 barrier; if inflation decreased and interest rates also fell in terms of the expected values, we could be facing an evolution that suits it very well to the crypto market.
The response of the digital financial market to the measures taken by the Fed yielded positive results, allowing the increase in prices of various cryptocurrencies. However, they later registered a minor setback; they remained above USD 20,000.
Conclusion
To boost investment sentiment in individuals, reaching a rebound phase where the upward trend is opened, and the terrible crypto-winter of 2022 can be left behind.
