Bitcoin Forum

 Inflation is a term virtually everyone is associated with and in one case or the other, is battling with in their economy as the cost of living a comfortable life is now looking like an illusion. According to statistics, a total of 95 countries are battling this scourge and with government policies not helping and the fiat failing woefully, it would be common sense to turn to Bitcoin.

 https://i.ibb.co/7RMFGKd/this-is-why-we-all-need-bitcoin-v0-z1f5jff64lv91.jpg (https://ibb.co/7RMFGKd)
 A fiat currency such as the dollar, euro, pound or even the yen is a trusted medium of exchange or legal tender issued by a government or recognized authority.
 As it is, the value of the fiat is collapsing and as it's not linked to a physical reserve and has no intrinsic value unlike gold and silver, it has the tendency to disappoint.

At present, Europe is the most hit by this storm and although, there are countries who are Bitcoin tolerant, its not enough. Fiat money looks to be the primary cause of inflation and countries who introduce CBDCs in my opinion are only worsening the situation. It's in times like this Bitcoin is needed as it has proven severally to be a hedge against inflation.
"Digital Assets will replace govt issued currencies within a decade or at least present a solid alternative to them"- Business Insider, Aug 2021.

 https://www.statista.com/statistics/225698/monthly-inflation-rate-in-eu-countries/
https://www.investopedia.com/ask/answers/041515/fiat-money-more-prone-inflation-commodity-money.asp

Inflation compared with bitcoin over the last year would be nearing 100%. It's easy enough to say it'll act as a hedge in these situations but what if it doesn't? Most of the inflation now is because people are forced to pay those higher prices and fairly willing to do it to not change their lifestyle (you did include the Netherlands in your list). Inflation can make people panic spend in cases where they expect it to go higher too, which would drive down the price of bitcoin quite dramatically if it were implemented as a full fiat currency and the only method of exchange (I don't think governments or people are going to leave fiat alone for a long time because they have some levels of protection and value as determined by those trading in it).

Governments are "helping" by throwing more money at the problem imo instead of doing as some are going to do with electricity and offering loans to suppliers if their costs go higher (as a pay as you normally do and we'll cover the rest - which is what should really be done in these circumstances and wouldn't be too expensive to do).

Bitcoin might be helpful during inflation or currency depreciation when it is seen as a form of investment. Hodling bitcoin until the bullish market emerges wouldn't be a bad investment in this global world economic crisis. But currently most people are not considering investments or alternative currencies, their main focus is survival. People are faced with high prices or goods and services which is reducing their purchasing power. Only few people that have extra cash can afford to invest in bitcoin 

Bitcoin can be considered a viable hedge against inflation in most developing countries. Most of these nations suffer from hyperinflation that makes their currency worthless. Bitcoin might have lost some good grounds but there is still hope that the price would soon rise. But most of these nations never recover from the inflation they suffer.   

CBDC is a new trend that needs to be integrated to keep up with other countries. Skillfully managed CBDC will allow you to more effectively manage, track financial flows and fight inflation.
Inflation is a consequence of the fact that most countries lived in abundance, because they sold their debts to other countries in the form of bonds and so on. And now there are many times more debts than all the values on the planet.

Money supply or the increase in the monetary supply is not the only one responsible for inflation, but there are many factors that can be controlled or uncontrollable and may lead to inflation.
Thus, high or uncontrolled inflation is what makes the economy in a state of chaos, and it is a symptom of several economic diseases, but inflation in itself is not a problem.

Also, comparing the inflation rate between countries gives a wrong measure of the difference in the method of calculation and the impact on citizens and the extent to which the state protects its residents.

Bitcoin's role as a hedge against inflation has actually been in question. This is primarily because for the past recent months or even years, its correlation with the traditional market like the S&P500 and Nasdaq has not only risen but even hit an all-time high. Below are a couple of charts I recycled from one of my older posts. Apparently, while there is fluctuation in terms of Bitcoin's correlation with these markets, it is high during the time when the inflation rate has gone through the roof.

Bitcoin-S&P 500 Correlation
https://i.imgur.com/9c0DCOO.png
https://www.newsbtc.com/news/bitcoin/bitcoin-correlation-stock-market-new-all-time-high/

Bitcoin-Nasdaq Correlation
https://i.imgur.com/Q4wDrTX.png
https://www.bloomberg.com/news/articles/2022-04-11/bitcoin-s-correlation-with-big-tech-increases-to-record-chart

Anyway, I don't agree with Business Insider that "digital assets will replace govt issued currencies." That's next to impossible.

Agree 100%

This is one of the most severe probelm in bitcoin history, his correlation to fiat money.

Intresting irony.
The simple truth is that they should not be trusted because they will always fail. You only trust something that cannot fail or wrong you. Fiat currencies would have to be perfect in order not to fail you but they are not perfect hence must not be trusted

 Their collapse is a proof why they should not be trusted.

Bitcoin has so many advantage over fiat currency,it might also be a good hedge against inflation as fiat value is depreciating as time goes. I don't think it will be possible to scrap the fiat currency totally,since it has been in existence for a long time. Moreover not everyone has the knowledge of bitcoin and its benefits. In the next 20yrs bitcoin will overcome the fiat currency

Inflation is natural but it becomes a problem when it continues rising without stopping just like this one we are experiencing presently. Fiat currency is facing so many challenges because inflation is hitting it hard.
 

governments will soon be revising policies to maneuver this crisis and since this is a like a snowball rolling from the top, its gonna be harder to stop it which they will need to print more fiat bills if they chose not to invade another country's resources.

we may not hear it from the news but people from European countries are already protesting. Moldova alone recently have a big one.
crimes will rises as well. Pelosi's husband just hours ago was hammered.

The time we are now globally is different from the past and very difficult with inflation but not many countries will turn to Bitcoin for solution. The example of country turn to bitcoin is El Salvador but no much have been done in the economy since adopting bitcoin, maybe it is gradually but bitcoin is operating different from fiat. I think the inflation can be a result of the challenge that the world is coming down with like increase expenses in the effect of global warming, talking care of refugee camp, war , disaster management.

Unlike what many people in the crypto world like to think, it is also tied in intrinsically with the fate of fiat currencies as people are moving money around and still classify it as a very high risk asset to hold. People are trading goods in fiat currency, which means everything you need for day to day living is regulated by this - no matter if you hold money in crypto which at some point you need to gauge against a fiat currency and convert it back to a comparative value that the majority of people are using in the world today. Inflation can infect cryptocurrency in just the same way, where traded prices will end up pushed out with many more decimal points instead.

Fiat is in such a big trouble I believe in many years ti come the power value of fiat would drop greatly, every country is having their own fair share of the inflation and economic issues.
I believe in a world where Fiat exist and also crypto-currency exist as well and it's the option of people to either choose with they want, but as the situation of Fiat continues to deteriorate the safer option people would have would be crypto-currency.

Their is no sound statistics to this but the more inflation last the more the crypto-currency adoption continues to grow.

This is simply true as regards the massive adoption of bitcoin. Inflation is only creating avenues for cryptocurrency to be explored because why pay higher price when I can get it at a cheap rate on any exchange network. Future cities are being developed in recent times to encourage the use of only cryptocurrency. The fait is definitely in trouble if this standing inflation does not pass.

CBDC is just a digital form of fiat, there's nothing different either CBDC and fiat, both of them will suffer inflation since it's centralized. In fiat they're print money that would lead inflation, while CBDC they're create the token out of thin air that would lead inflation too. If they want to stop inflation, they need to stop create CBDC and print money, if they have debt or want to pay their expenditure, they need to be effective to use their money.

Well, there's a scenario in which digital currency could replace fiat. With more more and more people getting to know and use Bitcoin, its value increases and in turn it affects the growth of the economy and as such, the society can embrace crypto to the point that the country's fiat would slowly fizzle out or  like the US were there are over 46m users and roughly 22% of the adult population own a share of Bitcoin, there can still be a number of digital assets and the Fiat currency but the govt would recognize both of them.
 
 It may seem like a fairy tale to think Bitcoin could replace fiat due to it's high volatility rate, but I believe it can be used as a solid alternative to the fiat.
 

Replace is one thing; alternative is another. I can hardly imagine that there will ever come a time when a country's currency is issued by somebody else private, completely replacing the one issued by the central bank. That's too much power and control being let go by the government. Of course, there is El Salvador and the Central African Republic that are using Bitcoin as a legal tender, but even in their case Bitcoin isn't replacing fiat.

I sometimes see that they write that bitcoin is not a very good instrument against inflation, due to the fact that it has fallen very much in price. But it seems obvious to me that bitcoin is an excellent tool that can protect against inflation, look 10 years ago how many dollars one coffee cost and what the price was in bitcoins, and look at this difference now. The answer seems obvious to me, fiat currencies are significantly inferior to bitcoin.

FIAT is always in trouble, now the only additional problem is inflation, which surprised many with its numbers, and now everything looks much worse than 2-3 years ago. The problem that the OP and many others have is that they think that countries should be even more tolerant towards Bitcoin, especially if they are referring to the EU, which so far has not caused problems for anyone who wanted to use Bitcoin in one way or another.

Bitcoin is only an alternative currency that cannot be a solution to the problem, even if the entire EU declares it legal tender - the problem still remains. The system is rotten, no doubt about it, but to change it, it would have to completely crash and reset. But if it were to happen, many would wish it had never happened considering the consequences it would cause.

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Do you think these data are correct? Who published them - the IRS, the state statistics office or perhaps some CEX? To me, that seems overblown, just like the numbers coming from Nigeria or India. When you add up all those millions around the world, it turns out that 20% or more of the world's population owns Bitcoin or cryptocurrencies, and that brings us to 1.6 billion people, which cannot possibly be correct.

I want tl believe that by now things have gone so bad beyond the reach if fiat to ameliorate them back to normalcy, fiat itself cannot fix things back as were before and that's why many have been looking for various alternatives with bitcoin in cryptocurrency, we must adopt am economy that is free from inflation, invest and retain the value of our asset than with fiat which diminishes in value with time and not until we begin to source for a means of survival outside fiat then there may not be any visible changes to come.

Historically, fiat currency in the united states was considered intrinsically backed by gold reserves inside fort knox and US central bank vaults.

(There are near to 13,000 metric tons of gold stored in fort knox to help back the US dollar.)

https://en.wikipedia.org/wiki/Fort_Knox

The degree to which fiat currencies are backed by gold reserves has arguably diminished over time with the loss of gold standards. Fractional reserve banking has also played a role in gold reserve capacity to back fiat thanks to general expansion of money supply.

More recently, internet trolls have claimed the US dollar is backed by the combined might of the US military which will seize foreign assets in the event of the US economy becoming insolvent. Considering russia's unpopularity when Putin attempted this with ukraine, I don't know how the united states was supposed to pull this off. Yet it seemed to be a common sentiment and urban myth and so may be worth acknowledging if only for pure myth busting purposes.

Well, the U.S. economy is backed by an entire military industrial complex that is prepared to defend its own sovereignty and the sovereignty of its allies at a moment's notice. It's not entirely a conspiracy or anything, a currency is backed by the government's solvency and that solvency includes a military ready to defend a country's assets.

I'm not suggesting that the U.S. military will go out and invade a country for pure profit motive, war's are expensive. USD has long drifted from the gold standard and even some of the looniest conspiracy theorist will say that Fort Knox doesn't have the gold anymore. Without dispute, USD isn't backed by anything anymore.

That is the problem with governments. Most of the time they don't try to cure the root cause of the problems instead they take some initiative here and there. They are making things worse by throwing more money at the people. Printing unlimited amounts of money and then distributing it to the people to relief their problems. If that is the best govt can do then they are of no use.

The gold standard ended in 1971.
All the world's banks and companies do not borrow in dollars and repay loans in dollars. A dollar is only valuable because borrowers are required to pay back more dollars.
World politics is like a big theater. While everyone is watching the performance (the events in Ukraine), the main thief is stealthily robbing all the spectators.

This is the risk that very few are talking about but that is there, when a huge economic crisis strikes the world people are more willing to raise their voice and fight for a change, so if things keep being as bad as they are I would not be surprised if several governments fell and in the rest there was a change on the people at the top as people look for solutions to their problems, and at Europe this could mean more countries following the path of England and leaving the European Union for good.

Yes, fiat will remain no matter how strong the inflation is in the land, because the government still have the power to make it depreciating or appreciating in the country. I don't think, this inflation can affect crypto the way is affecting fiat money right now to devalue because crypto is a decentralized currency that has the capacity to increase higher without the permission of the government and decrease without the permission of the government. Owning crypto in this bearish season, it will really help you to make a huge amount of money in the future when the price of crypto hit higher in the market.

If when you say cryptocurrency you mean bitcoin, then yes I agree with you, it will bring you profit, but if you want to save yourself from inflation with shitcoins, then you may have problems. In the future, governments may make a digital dollar, or euro, and they will also be subject to inflation, because they can also be printed in an unlimited amount.

According to the information I have from many countries fiat currencies were falling every day and if you check the value in long term you would be shocked because of that and that's all because of the government's policies in any country and pricing worthless by the government while the doing this will make the that fiat more worthless, for example, a country like Turkey, they were losing the fiat currency value in long term but recently and during the last months the inflation rate was much higher compared to the last months and this made Turkey fiat even more worthless than it should be normally.

There's a real problem with fiat

But tell me one thing it isn't that this is happening for the very first time we have seen in past recessions as well that the economy has collapsed due to increased inflation and ultimately leading to a spiral situation but eventually after a recession the economy stabilizes itself somehow or the other. Never have I ever seen the economy completely getting ruined or fiat coming into question on such a crash. Why do you think this time is different? why are people thinking that this time fiat would end?

That is mainly because when nations do not have a plan like companies do, that means they do not have anything ready for the future, plus nobody saves them neither. I know that people love liberal politics a lot here, and socialism seen as a big devil’s work, but in reality, if governments could find a way to make income from things that are not just pure tax, then it would make so much better for all the people that live there, plus there wouldn't be need to keep printing money.

I believe things like education, healthcare, and defence should be government owned, and there could be some money made, look at USA and how they sell weapons, why not build some planes and missiles or whatever and sell them? If it helps then it would help.

Actually, the source of the problem or the beginning of this uncontrolled inflation was when the Pandemic started and when people were told to quarantine themselves. or rather isolate yourself by not interacting with many people. to break the chain of viral contamination. Now that's when the government of a country like the US for example. become worried that the economic cycle will be hampered or worried that the economy will stop. so the printing of money began. and the government distributes money to the public to spend to keep the economy running. and it worked. but the problem came after. ie where the supply of money that has been printed becomes too much. and causes the value of the currency to decrease and the price of goods to rise (uncontrolled inflation). so that now to overcome this, the government or the bank will definitely raise the bank's interest rate to attract customers and attract too much money in circulation. that's one of the initial causes.

but it doesn't stop there. because actually inflation is a good thing in the economy if it can be controlled properly. but when inflation gets higher it quickly or gets out of control. then of course it is very bad for the economy. and the second problem from the current uncontrolled inflation is that during the pandemic many factories or industries have reduced employees (layoffs). and production is reduced. because the buyer's interest decreased during the pandemic. so the decision to reduce production and lay off some employees looks logical. but problems arise when the pandemic ends. namely there is a surge in buyer interest in a product. and people are getting thirsty for shopping after the pandemic is over. while the producers were not fully prepared at that time. because they now no longer have a lot of employees to make large quantities of products in a short time. and this is the second factor of uncontrolled inflation and rising prices of goods, namely the scarcity of products and the high interest of unbalanced buyers. actually there are some more factors such as war and such.

The problem with this idea is that it has been tried before and governments are very inefficient at producing anything, if we take a look at communist countries in the past in which they owned every single industry you will see that over and over again they were overtaken by economies that were capitalist in nature, so while I can understand your point and it makes sense, when such an experiment has been done in real life it has always failed.

This whole current inflation thing reminds me of the 2008 global financial meltdown and the consequences it heralded. The small sized company I worked for which was barely starting up then was severely hit to the point that a good number of staff were let go. Some people have opined that the aftermath of that recession birthed Bitcoin. Let's see what will be birthed as this global inflation heightens by next year. May be another phenomenon? I'm only worried that it will get worse by next year.

Fiat has been in real trouble ever since they stopped backing it with something tangible and instead with the full faith and credit of said government.  Every year, fiat is worth less and less and buys less and less.

what is beyond our authority is the government's policy on the legalization of cryptocurrencies. the most difficult thing to penetrate is about the necessary politicization of interests. I personally believe that cryptocurrencies will be worthy of replacing fiat currencies, but not in a short time, given that there are still many pros and cons regarding this, and it actually hinders its development

I think This is an interesting topic at the moment, many new crypto-currencies and blockchain-based startups appear every day. The crypto-currency market has grown rapidly over the past few years and has already managed to attract interest from large industrial investors. Today many experts have already recognized that over time, as a result of competition and technological progress, cryptocurrency will actually become a more efficient and highly secure system compared with banks and payment card systems.

At the same time, I'm excited to see where all this is leading and what the future has in store for cryptocurrency and blockchain. If there ever comes a day when our fiat paper currency is replaced by a cryptocurrency, we'll all look back at this time as the catalyst that got us there.

I do not think that it will "replace" fiat, fiat is something that each nation needs for their own freedom, if they all start to use bitcoin then the bigger ones could take control over the smaller ones. Right now, even if it means a financial war, you can go against USA, which will hurt you like how it did to Cuba for example, but you can have freedom. In that case everyone would be using the same, and that is not going to be fine.

Alternative payment method to fiat is the way to go. The best thing that could happen would be like El Salvador, just get it legal tender in all the nations of the world, which means alternative to fiat, and that would be fine and would actually make crypto go insanely high too.

Inflation is increasing everyday and their is nothing we can do since we are earning in fiat for those of us that are working and doing some casual businesses that is bring food to our table. Everybody is complaining of recession coming to hit us in full and also the hike in food prices and other goods. Things are becoming very difficult these days and things we could buy with our money can no long afford our necessities. Since there is nothing we can do, we can as well try other things we can do  that we give us some funds.

Yes, that's right, this FIAT currency will continue to experience inflation from year to year, why is that?
The more the population in a country, the greater the need to finance their lives, the need for commodities from year to year will increase, while the commodities used will decrease, so that the scarcity of raw materials causes a company to have to spend more. This is what causes the price of goods to rise due to increased operational costs and high demand. the last one is the government's fault, which prints too much money so that the circulation of money is too large, the circulation of money and goods in circulation must be balanced.
while for Bitcoin, I think it should be pegged to gold so that its volatility is not too volatile and helps maintain its value if it is to be used as a global currency.

Exactly, the most recent economic crisis was in 2008 and it somehow recovered, and the world economy continued to grow and boom after that without the collapse of fiat or the need for a alternative solution. Bitcoin is really good but don't exaggerate it too much.
What role Bitcoin will play in the economy in the future is unpredictable but with the current economic crisis I think we will recover soon without the help of bitcoin and bitcoin is the one who needs the help of this economy. Bitcoin will not be able to recover if we continue to fall into crisis and inflation.

Fiat will always be a problem because it is impossible for the central bank to monitor the circulation of real money, sometimes somewhere there is too much money so the price is very expensive, but in rural areas with small money circulation the price is cheaper, and on the other hand, there is none. guarantee that keeping fiat will be profitable so that people prefer to keep assets such as property, gold or something else.

Can you explain more? as you say the growing population and increasing demand while the raw material is scarce makes companies have to spend more money to produce thereby pushing up the price and it is understandable that the government continues to print money to balance population density and costs, why to blame them so much. I think all governments are aware that printing too much money is not good but do you have a better solution?
In 2020, the outbreak of the pandemic brought the economy to a near standstill. If the government hadn't pumped the money, we would probably have starved to death before we died of the disease.

Economic crisis also has a cycle, once money is pumped out too much, it will cause crisis and inflation. That was also the time when the Fed stepped up to raise interest rates to control inflation and bring the economy will recover. This cycle will always happen and repeat, that is how the world economy works.

Now the price of goods in rural areas with the price of goods in urban areas no longer has too much price difference, so the expensive or cheap of an item is also difficult to measure if only through the circulation of money around it. And for the problem of saving money or owning other assets such as property and gold, it is only about how to invest in slightly different ways with the aim of making profits and being safer from the risk of loss.

Fiat has lost its value, it is a fact that actually represents how we feel all along. Inflation has obviously taken on many fiat values ​​with varying degrees of severity in each country. So one might be right about one opinion, bitcoin is a very good hedge against fiat in this kind of situation, but of course the risks will cause most people out there to be reluctant to choose it even though staying in fiat is hard.

This year I think it's not as bad as 2020 regarding the value of fiat against the dollar for my country, but of course the current inflation has had a big impact on the people's economy. We complain, they complain and most of us complain, but the solutions won't be the same for everyone.

I believe they could just buy and hold it as well and they are not doing that. Most governments are richer than the richest person in the world, not only they could get taxes like insane levels, but they could also just print money if they ever want to, we have seen them all do it in the past 2 years. Which means they could afford to buy tens of billions of dollars worth of bitcoin.

Any nation that spends just a 50 billion dollar on bitcoin would not only make a huge profit later on, turn that into 500+ billion when it does 10x (and 180k is not impossible in the next 5 years) and they would also be able to start the bull run as well all by themselves for that much money. It is just such a simple idea.

in fact even before the uncontrolled inflation that is still happening today which has an effect on the decline in the value of currencies in several countries. it turns out that even when inflation is under control, the decline in the value of the currency has slowly been and continues every year in several countries. The indicator is seen in the increase in the prices of property, goods and services every year. and the difference now is that inflation is already at a higher and faster rate which makes the rate of currency decline faster. and indeed everyone now has almost the same complaint but with different problems. and the solution for each person will be different.

I fully agree with you that Europe is doomed, the Euro is going to lose a lot of more value in 2023 and whoever has the chance to diversify out of Euro denominated assets should be doing so. Crisis management has always been a bad thing in Europe, politicians over here talk too much and need way too long to react and get anything done. Together with the double digit inflation rates which will likely stay high next year, there is not much we can expect from the Euro. Gold doesn't seem like a good alternative right now which leaves crypto currencies as the main inflation hedge together with real estate investments. The problem is that people are afraid of inflation, but don't react to it. So far most people sold any risky assets in 2022 and didn't reinvest. The cash levels are very high in Europe right now, among my friends most of them have 50-70% cash levels in their portfolio. Which is insane to be honest, because you lose so much value with cash during high inflation times.  

So far, it seems the Fed reserves original mission to solve economic issues is becoming blindsided; since they have tried to combat the inflationary situation by raising interest rates. And it looks to exacerbate the whole thing because instead of tightening the economy, as was it's initial aims, it has all but had a ripple effect since demand of goods and services by both consumers and business alike have slowed down.

 All these can help reduce the value of a country's Fiat.

The problem with the 2008 crisis is that it was never really resolved, governments knew the cause but instead of trying to legislate and create a set of laws so it did not happen again what they did was simply to throw a gigantic amount of money to the problem hoping it went away, and it worked but only for a time, now the pandemic and the war at Ukraine have brought back the fears of a new crisis with the huge disadvantage that now governments cannot play that card again as they are heavily indebted already.