How Dollar Inflation is Affecting Bitcoin

In this episode, We will discuss in detail How Dollar Inflation is Affecting Bitcoin.
In recent years, cryptocurrencies, especially Bitcoin, have become more appealing to investors. Part of the reason is the idea that they are comparatively more resistant to the effects of inflation. However, Bitcoin is not completely immune to the impact of dollar inflation.

The recent trend in dollar inflation
Simply put, inflation is defined as the process through which currencies decrease in value over a period of time. This causes the prices of consumer goods to rise. There are various economists out there who believe that some degree of inflation is important and even good for the overall economy. Therefore, the US government has printed a greater amount of money than needed and has done so for the past couple of decades.

What does inflation of the US Dollar mean for bitcoin?
When fiat currencies exhibit a high rate of inflation, individuals may feel encouraged to turn towards Bitcoin. To them, digital money will become more appealing because the dollar that they previously placed into a savings account is losing its value. Thus, a rise in inflation of the dollar is likely to raise the popularity of the cryptocurrency in question.

Additional arguments regarding bitcoin
Furthermore, there is little to no chance of Bitcoin being manipulated by the adjustments made in the interest rates by the government. The printing of more money in order to reach policy goals also does not have much of an impact on this cryptocurrency.

Consequently, the scarcity of this cryptocurrency is important when it comes to making it a store of value, which resists the impact of inflation on the US dollar. It is a given that there will only ever be 21 million Bitcoin, out of which 19 million have been mined up until now. After every ten minutes, miners of this particular currency process an addition ‘block’, adding 6.25 more to the network.

Does a fall in the US dollar decrease the value of bitcoin?
Meanwhile, some people argue that inflation of the US dollar brings about a fall in the appeal of Bitcoin as well. This is because when it comes down to it, the profitability of any transaction made in cryptocurrencies is consequently measured in dollars. Ultimately, it cannot be denied that Bitcoin lies at the finish line of a monetary regression chain, which starts with gold. The cryptocurrency in question does not have its own chain.

Breaking the monetary regression chain
Taking out one of the middle links of the monetary regression chain will render it useless when it comes to exchanging it for gold. In real terms, Bitcoin will eventually be deemed as valueless, irrelevant of what its price is in dollars. In such a case, the monetary economy would be required to be reconstructed based directly on gold. This is mainly due to the fact that gold can be utilized as a commodity.

As a substitute for money, the US dollar, as well as all fiat currencies, are considered to hold any real value because they can be exchanged for actual monetary funds, or rather, gold. Thus, if there is a rise in the inflation of the US dollar, it will cease to exhibit any substantial purchasing power. Consequently, the dollar will be unable to be exchanged for gold, causing Bitcoin to fall to zero where real purchasing power is concerned.

The impact of dollar inflation on bitcoin
It could easily be argued by various experts that inflation of the US dollar makes cryptocurrency, especially Bitcoin, a more appealing investment. They could cite the recently occurring incident in February of 2021 when the value of the US dollar fell and led to Bitcoin reaching its peak value.

All in all, as long as the US dollar can be used to purchase any amount of gold, Bitcoin will also continue to increase where its purchasing power is concerned. On the other hand, if there is an increase in the inflation of the US dollar, people will not seek refuge in Bitcoin. Instead, they will turn to silver and gold, whereas the cryptocurrency in question will be rendered useless.

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