USA inflation and crypto market cap

[levtahor]

How the increase of the American inflation contributes to the increase of the BTC's and altcoins price? If the fifth largest currency in the market (USDT) is fiat currency based, at the same time that USDT is one of the main crypto-currencies used to transform fiat currency into crypto and vice versa (at least in my country), what are the arguments that contradict the possibility of the whole cryptomarket value being inflated (or estimated/valued) by the extra dollars that were put in the American economy since the beginning of the pandemics? What would be the means for evaluating how much independent of the American economy is the cryptocoins market? And above all, personally I believe that one day 1 Bitcoin could be equivalent to 1 million dollars, but what will be the real value of the dollar when this happens? Maybe I'm ignoring many things in this thought, so I tought that would be interesting to create this thread to know what you think about this.

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[Gyfts]

So first you have to look at the world's GDP and look at the proportional share by each country.

https://www.worldometers.info/gdp/gdp-by-country/

You'll see the US has the world's largest GDP, one of the highest GDP's per capita (with consideration to a 330 million population), although some smaller European countries have a larger GDP per capita.

So the largest economy in the world will have the largest effects on Bitcoin, depending on how they choose to moderate their fiscal policy. China is a close second.

On inflation - view the US federal reserve liabilities sheet:

https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm

Notice during the housing crisis, where nearly the entire global economy collapsed, you saw what the federal reserve did in order increase money supply by taking on a number of liabilities. They did this to prevent deflation of the US currency, which essentially causes people to hoard cash and grinds the economy to a halt. Examine the steep incline in March of 2020 where they employed a similar method. Keep in mind, interest rates were already low during this period. The federal reserve has been using the strategy of quantitative easing which is demonstrated in this chart, where they inject money into economy, producing the side effect of inflation. Investors and currency holders flock to alternative assets in order to prevent their purchasing power from going down.

So really, you only need to look at the federal reserve liabilities chart to get an idea how the US economy and inflation effects crypto and why it's such a big deal. None of this should be a surprise.

As for USDT, presumably as currency inflates you'd need more in circulation.

[odolvlobo]

Your question has two parts:

1. Will the price of a bitcoin increase due to inflation?

Yes, inflation causes the prices of everything to increase due to the decline in the value of the currency. 1 bitcoin may be worth $1 million dollars some day, but I believe that will be mostly due to inflation.

2. Will the price of a bitcoin increase due to reasons other than inflation?

Greater adoption causes the price to rise regardless of inflation because greater adoption means more overall demand for bitcoins when the supply is limited.


When discussing future prices, I think it is generally better to specify the price relative to the current value of the reference currency. Since inflation changes the price of something but not its relative value, it is better to ignore inflation (unless you are talking about inflation).

For example, I believe that the maximum price of a bitcoin is about $400,000 in today's dollars because that's what the price would be if all the money in the world is replaced by Bitcoin. Since I don't know what inflation will be like in the future, I have no idea what the nominal price of a bitcoin will be.

[fiulpro]

How the increase of the American inflation contributes to the increase of the BTC's and altcoins price? If the fifth largest currency in the market (USDT) is fiat currency based, at the same time that USDT is one of the main crypto-currencies used to transform fiat currency into crypto and vice versa (at least in my country), what are the arguments that contradict the possibility of the whole cryptomarket value being inflated (or estimated/valued) by the extra dollars that were put in the American economy since the beginning of the pandemics? What would be the means for evaluating how much independent of the American economy is the cryptocoins market? And above all, personally I believe that one day 1 Bitcoin could be equivalent to 1 million dollars, but what will be the real value of the dollar when this happens? Maybe I'm ignoring many things in this thought, so I tought that would be interesting to create this thread to know what you think about this.

- Bitcoins and other cryptocurrencies even though are strongly integrated with the general economy, they still don't get influenced enough to change their course if the USDT's market is undergoing inflation.

- The small changes that they might experience is generally nullified by new investors who are looking for something that might protect their investments from the government itself.

- You can take an example from the COVID itself, in the beginning we had extreme inflation in local markets and it affected everyone, but with time, cryptocurrencies like Bitcoins, not only registered an increase in their value as an asset but also gained recognition from various countries like El dorado.

- The level of integration with the economy would define how much it's affecting the market, hopefully it stays decentralized ( government manipulation and control is all together not a good thing for the market for long terms)

[hugeblack]

Before there was what is known as USDT, Bitcoin continued to rise and fluctuations, but the problem was the difficulty of finding someone to sell the currencies to before there was a collapse in the price.
The idea of ​​stable coins as an accounting tool came to settle this matter and take advantage of fluctuations, and thus gave more liquidity to the market, but if it disappeared, the growth of Bitcoin would accelerate, but at a slower pace than the current one.

As for the impact of the American economy, it affects all aspects of life, because the dollar is mainly linked to many activities, and in the long run, the increase in part of the value of Bitcoin is due to inflation that devours currencies.

Controlled inflation is not bad in the short term and cannot bring about political and economic changes, but uncontrolled aggregate inflation is the worst scenario for everyone and no one will be able to predict what will happen.

[el kaka22]

It is obvious that there is a good situation right now where inflation is not going to be zero or even low. There is a good case that we are going to see official numbers that are lower than what people are feeling right now. Sure, the price for milk is not going down but the house prices, education prices and health prices are all skyrocketing compared to past and that is why inflation is a lot higher.

However, because of the price of apple, milk, bread and so forth doesn't go up too much they say that inflation is not too much. I believe there is a good chance that we are not going to see something that would be real and only fake numbers. This causes people to put more money into crypto because they do not want to lose their wealth and the value of the money, they have end up getting lower and that is why they want to buy bitcoin so that they could keep their value at a high level and not lose it right away because of inflation which makes the price of bitcoin go up.