Bitcoin Forum

This is the figure for April, yet still quite a figure to be dealt with for those who live on salaries, that tend to go after the inflation, and great news for those who have a mortgage or own money, since they are on the winning side for now - until interest rates catch up.

How is this going to affect bitcoin? If we make an analogy with commodities and particularly those used on the industrial processes, it will have a lift effect in price, sometimes much higher that what could normally be for other assets. I think is a good moment to stockpile bitcoin, copper... even tin, although is a bit expensive already.

Bitcoin will be a better option. Its volatility will always make money to someone who trades it. As inflation goes high every month, the savers and the ones who live on salaries will have their money but the purchasing power will decline as inflation stays. This is the reason why hedge fund managers are so bullish that they are adding Bitcoin to their balance sheets.

Winning on the side of having a mortgage cannot make up with losing on the side of having to confront with rising prices or devalued savings. The former is but a minor consolation for a generally unpleasant situation.

Anyway, the fact alone that fiat depreciates in value over time makes Bitcoin more interesting and attractive. The higher the inflation goes, the more attractive Bitcoin becomes. Anything whose value is appreciating or remains constant is much better than fiat. So stocking up copper, tin, and so on is way much better than keeping a fiat savings account.

Inflation as calculated in the CPI is one thing; actual inflation is another. If the official data show 4%, the real inflation is surely much more, which means that they cannot hide it as much as they would like to.

In theory, this is going to flow money into Bitcoin and other assets. It doesn't have to be a today-to-tomorrow thing, but in the next few months for sure.

Yeah, US citizens are no longer used with inflation. Well, things will change now.
On the other hand, I've heard somewhere that various materials for industries (including steel and construction materials too) have become more expensive worldwide lately (start of spring 2021).

They aren't used to it because it slowly adjusts a little each year so it's not that noticeable plus if people are noticing it then it can induce panic and unnecessary anxiety. Raw materials get expensive because production is getting smaller or limited.

In my country inflation came under 10% only ~16 years ago and now 2-4% is normal. And these are the official numbers, I believe that the reality is a tad worse.


That's what I wanted to point out. Yes, the production and transportation got more expensive, especially since that ship was stuck for a while in the Suez channel.

Indeed, storing bitcoin and precious metals would be a much better option than storing fiat, fiat loses its value over time and with the growth of inflation and its purchasing value becomes almost non-existent, so the best option is to buy bitcoin and precious metals and keep them not only as a store of value but also in order to multiply investments and profits because their value increases With time unlike Fiat.

Not sure how they did this 4 percent prediction, because I expect it even much more than this. As I can see, the inflation rate is rising each year and government tries promises to control it and they will usually try to decrease the rate by unfortunately using federal reserve dollars and printing too much money to increase the funds while they will make a bigger mistake by providing too much money supply which can be the reason for decreasing the value of dollar against gold and other assets.

To understand what will happen and what to do, you need to know exactly what is happening and why it is happening. In the US, inflation will reach 4%, even if this is so, and I think that everything is much worse there, then you need to understand why this happened. The US dollar as a global reserve currency has outlived its usefulness, it is also called the international financial system, so inflation is the depreciation of money, but did anyone doubt that there would be no inflation when printing trillions of dollars? Yes, there are those who believe in eternal dollars, but unfortunately everything is not as we are told, but everything is much worse. Is there a solution? Probably, this solution exists for the United States itself, this is Bitcoin and other cryptocurrencies. But how all this will happen and where in the end all this will lead, we will very soon be able to see. But we can already say for sure that inflation in the United States is a signal for the decline of the dollar as an international reserve system.

I guess it takes some time to get reflected in the market. The influx of fiat money during 2020-21 is something unparalleled. The M1 money supply increased by more than $5 trillion during this period in the United States, and by similar amounts in the other countries. Such a huge increase in monetary supply is unheard of, and has never happened in the past. Once the pandemic is contained and the economic growth resumes, the inflation rate is just going to explode. I won't be surprised even if it gets to 20% or more.

Isn't it always have been 4%? Usually, it's 7%, but with all the fees and tax, right? If many people have a lot of extra money to have, they would probably invest in something else, which could be to buy more cryptocurrency. Not affect the only Bitcoin but everything to put the economy back in its rightful place.

Isn't storing precious metals expensive? In my country, when you buy a gold or something in the realm, the store or banks keep them for safekeeping and you are forced to pay for safekeeping. But you are right that fiat is much worse to be stored compared to other alternatives. Also, the 4 percent is a normal number for inflation and in fact some economists are saying that the number 4 is the perfect number in terms of inflation.

You can go for gold ETF, which can be stored using a demat account. I have invested in various gold ETFs for the last 15 years, and never faced any difficulty with them. They can be purchased and sold with relative ease, unlike the case with physical gold. But obviously you need to go for the most trusted issuers and even then there is a very small chance that the fund may be confiscated or the issuer may go bankrupt. So you need to decide whether you want to go for physical gold (and the risks related to it), or to go for paper gold (with another set of risks associated with it).

This is the choice we have today.  There are many choices of instruments that can be used to avoid inflation that occurs.  Indeed, 4 percent is still considered normal and not too high.  But if it is not controlled properly then it can exceed normal limits.  This new kind of gold is still not common in society and those who are less literate find it too risky.

     No matter the case, the devaluation of some assets is never a good thing for anyone, even if we say that they have other things that can doge the effects of inflation. But still though, it is still better than nothing right? Well, to some degree it is, just not enough.

     The way it would affect bitcoin would be pretty positive since the way bitcoin currently is can make anyone interested with it. Specially the paranoid ones who are scared to death on having their assets devalued due to inflation. And yes, the more you diversify, the better. That is, if you put a limit to it so that you can manage your assets well enough to not have losses instead of gains in the long run.

According to this website (https://www.usinflationcalculator.com/inflation/current-inflation-rates/) the US Dollar had a 4.2% inflation rate during the month of April and for May it had 5% which I think is abnormal considering that it is more than what the USD is experiencing during the past months/years. I know that the common concept of an increase in inflation will translate to people will most likely save or invest their money to other hedges and this will most likely be the case however there is no guarantee that people who has US dollars will be focusing their money towards Bitcoin or in the crypto market in general. Other factors such as their risk appetite and other investment opportunities will also be considered and I don't think people in the US have the same way of thinking as the South Koreans where their crypto exchanges have more volume than their own stock market.

since bitcoin is still being adopted and still the large majority of people haven't adopted it the effects of inflation on bitcoin is going to be twice as big. once is because of obvious reasons that as fiat loses its value, bitcoin gains more value against it. but another reason is that as inflation hits the economy hard people will start seeking safe havens to escape their failing economy and one of the very viable options in front of them is going to be bitcoin. with its phenomenal annual performance  there is nothing better to convert your inflating fiat to!

Looking at the current inflation mechanism, only transmission of monetary policy remains within the conventional corridor. Let's look again at economic growth and inflation, which has almost reached even 5% in one year. This is especially clear when the complexity of the transmission mechanism in the US is related to changes in the role of other countries' economies.

Maybe you still remember the explanation from the "Quantity Theory of Money" which said that this messed up the role of the Dollar in the US economy regarding long-term monetary policy which only had an impact on inflation.

That's the official one, things change individually a lot more. If you took college costs as the inflation rate in USA, there would be 10x and even more increases on average, if you took minimum wage then you would have nearly zero increase for the past 20 years.

Basically it all depends on what you take as your average, they put in this insanely complicated bunch of stuff and then they say it is 4% or less, but there are tons of stuff that got 5%+ more expensive. I am not American so I do not care about that, but in my nation it is said that we have about 7% in inflation whereas I can tell you that it is more than 30% very easily, it is drastic here, we are living a horrible period and I do not know what is going to happen if we keep this up. Long story short the 4% is official number and we may not consider that as the truth, it is just what they tell us but it is really not that low.

based on the impact of the lag level, indeed in my opinion there is no better opportunity if we have to devise all means to be able to hoard large amounts of Bitcoin for price volatility in the future. obviously it provides increasing value resilience. options such as copper, petroleum and others for me have not been able to touch the area. because it really depends on the suitability of interests and the flexibility of financial management. and bitcoin is much more efficient now and then.

Almost every country around the world has been hit so badly with inflation this time. India has shown a wholesale inflation rate of more than 12% and a retail inflation of more than 6%, I think capital appreciation is going to get much more difficult now as the interest rates are still quite low, Infact, even most of the Term Deposits are offering lower interest rates than the Inflation rate of the country this time. I think the only source of Investment left to protect your Capital from Inflation is just Stocks and Crypto. While Stocks too should be chosen in an intelligent manner. High Debt stocks can become riskier if Interest rates try to coincide as per Inflation Rates, High debt companies might not be able to Maintain Adequate ROE if this happens.

Most of the country now are suffering from a big inflation and that is expected considering the money that the government printed over the past months to fight this pandemic. Debt per capita are also rising and that can affect a country in long term if they are not able to address this problem. We are still on a pandemic though some countries are slowly going back to normal which is a good sign, we can still feel the effect of this pandemic in the next 2 - 5 years.

Wrong the volatility will only helps those who are capable with bit funds and can wait for long but what about those who are making money in a short period of time? they are the most affected one on this matter.

https://www.cfr.org/in-brief/how-much-too-much-us-inflation-debate-heats

This is what tackles this one ?


https://i.imgur.com/oU2zVIu.png

for me this will Hurt everyone but it looks like not that affecting the market for now.

Yes, official numbers are useless. The daily life is what really matters. Prices in supermarket are spiking insanely in a monthly basis, if not weekly. If we count all these increasements it surpass the official inflation easily during one year period. It's a good moment to exchange funds into bitcoin, otherwise people will be losing money even if they have some kind of traditional investments, especially fixed income. Actually since last year the scenario looks really bad and from 2020 on I've been trying to have less money in fiat as possible. Only maintaining some fiat balance for daily expenses and that is all.

Completely agree with this. I am residing in India, and there the pattern may be different to what you have in the United States. But from what I have noticed, there are a few things, which hardly went up in the last 10-15 years. I am talking about electronic appliances, textiles.etc. But then there are a few, which went up by 2x or more in the last 10 years, such as real estate prices, medical expenses.etc. It is very difficult to calculate the average, because we don't know how much weightage must be given to each commodity.

I think a huge crash could eventually come in the Economy due to the after-effects of the pandemic. It's because stock markets around the world haven't really discounted the pandemic and economic indicators. This is generally a short-term deviation and in the end, the market coincides to show the health of the economy. The huge money supply has so far been the reason that markets are stable. In developing countries, new retail investments have come into the markets which have kept the market intact until now, we will see a big crash in the next 3-4 years I think when the investors would eventually realize that all these attractive valuations couldn't realize themselves.

I've been noticing prices of various items in the grocery stores going up, little by little.  Fast food and gasoline are getting more expensive as well.  I rarely eat fast food but did this week and was astounded at how much a typical burger goes for these days (dollar menu excluded, of course). 

So yeah, I tend to believe inflation was at 4% at least in April--and I'm expecting it to get much higher this year.  There's been too much stimulus money and, of course, too much money creation by the Fed for inflation to stay low.  The only thing I'm hoping for is that we don't see massive inflation (which happened in the 1970s) or, at the extreme, hyperinflation.  If the latter were to occur in the US, Canada, most countries in Europe, China, or other developed countries, the whole world could be in serious trouble.  A lot of members of the forum have been talking about that possibility for a long time, but I'm not sure if many of us would be prepared for it.

And as far as bitcoin is concerned in this context, it's looking a hell of a lot better than the USD and many of the other world fiat currencies.  I'd like to think that if hyperinflation struck, things would start to be priced in terms of bitcoin instead of fiat.  That would be every bitcoiner's wet dream, though I wouldn't want to see hyperinflation happen at all, no matter how much bitcoin would benefit.

Some are looking at those numbers and think the inflation was 4.% between two months but those numbers are compared to the previous year, so in a 12 month period the prices have gone up by 4.2% not from March to April.

If we go month to month:


The trend continued in May but it's not that catastrophic as some people think.
https://www.bls.gov/news.release/cpi.nr0.htm


A 5% increase each month would lave doubled all prices in a year and two months, that's happening neither in the US nor in Europe, and a lot of those increases are caused right now by exceeding demand and limited offer as the economy is still struggling to fill all the gaps in logistics and manufacturing the shut down left. We're paying the price for shutting economies, it's easy to stop something, far harder to start it again after you left it abandoned in a ditch for months.

In the end, fears about the persistence of inflation forced the hand of the Fed and the U.S. central bank, while reiterating that it will continue to purchase assets at a pace of $120 billion per month in the third quarter, announced that it might raise interest rates twice in 2023 instead of in 2024 or later, as promised in March. Bond purchases could also end sooner than said, as evidenced by the fact that the Fomc (the Fed's operating arm) has already begun discussing options for suspending purchases. This is why Tiffany Wilding, economist at Pimco, would not be surprised if the Fed announced the first tapering move as early as September.

What do you need to do to protect yourself?
Buy Bitcoin, of course.

I think that if the total inflation for these year is still below 4 or in 4 percent exactly, it doesn't matter what's going to be the rate per month. I think that there's nothing to worry about monthly inflation unless the percentage is on the 3 or higher digit territory.

I would not consider a 4% catastrophic in the current context. If you tell me a few years ago, this would be a signal of something going awfully wrong and a failure of the FED to meet the expectations, but after years of nearly zero inflation and the COVID, having a 4% may not be such a bad thing. As I have said in other posts, we do have to pay for the COVID crisis and that is going to be in the form of debt and the hidden tax that is really inflation.

I think that may people in debt will be happy about letting it go a little bit, just for a while so rates do not need to be raised, you know.

Mad money printing may kill any currency, even USA

Inflation may not seem to be that bad but when you take the time to actually measure things up you can easily see the price of everything going up and we know what this means, when the price of everything goes up it means fiat is crashing and this is without a doubt good news for people like us.

This is a bullish sign for bitcoin as people will try to look for ways to protect their wealth and what can be better than an asset that is digital in nature, scarce and can be used to purchase all kind of products all over the world.