Despite all the attempts by central banks to control inflation, our money is losing value. It always has been, and always will be. The average person who does not know about investments loses about 5% of their savings in a year. Every year, money gets cheaper. That is why it makes sense to buy promising cryptocurrency on the alligat0r exchange aggregator website right now.
Cryptocurrency is an alternative to the traditional financial system, which is also subject to inflation. What is inflation in the cryptocurrency space and how can you counteract it?
What is inflation?
Inflation is the rise in the prices of goods over a certain period of time. It is expressed as a percentage. Inflation in cryptocurrencies is a bit different than in fiat money. Instead of percent, it shows the total turnover of new coins that are issued in a year. As an example, consider bitcoin. In January 2020, bitcoin had a turnover of 18171000 BTC. In December, the value increased to 18538000 BTC. Bitcoin inflation for the year was 2%.
Consider another example. In January 2019, bitcoin turnover was 16,078,000 BTC, and in December it was 16,755,000 BTC. Bitcoin inflation for the year was just over 4%.
Satoshi Nakamoto knew in advance about the inflation of the asset. That is why the deflationary system was implemented, which means a reduction in inflation levels of the first cryptocurrency every year.
You will probably ask right away: what is a deflationary model, anyway? You have probably heard of halving, which occurs every four years on the blockchain. That is what this system is. Because of the regular decline in market supply, Bitcoin is less susceptible to inflation than altcoins.
If it is in demand, Bitcoin will not depreciate as quickly. This is a disadvantage of many bitcoin forks, including Bitcoin Cash or Bitcoin SV. They have the same deflationary system, but depreciate more because of low demand. No matter what kind of deflationary system a cryptocurrency has, what matters is the demand for the asset in the community.
We did not imply that cryptocurrencies could be subject to inflation. That is why we started to actively invest in them. But time has shown that only bitcoin has the best deflationary model. Even the U.S. dollar, which before the coronavirus epidemic was considered the world’s most stable currency, now has inflation of about 5%.
And what about Ethereum, which is used by millions of investors as a safe haven asset? That is where apps and games that run on Ethereum come into play. It is the most in-demand protocol for developing smart contracts and applications. So it is already in demand by default. By the way, you can read about an interesting opportunity to invest free money at https://alligat0r.com/blog/where-to-buy-lisk-in-2022/.
Bitcoin and Ethereum have the highest demand on the market and have a multimillion-dollar community. Because of that, inflation here is minimal. If you want to preserve capital in cryptocurrencies, use only in-demand and liquid cryptocurrencies. Investing in coins like EOS or Bitcoin SV will not be the best choice. But investing in Bitcoin and Ethereum is a win-win option.