As inflation peaks in the Eurozone, bitcoin (BTC) and other cryptocurrencies emerge as a better alternative to currencies decree.
Increase in the interest rate in the euro zone
Last Thursday, the Governing Council of the European Central Bank (ECB) revealed its intention to raise the interest rate for directors in the euro zone by 0.5%. A first since 2011. To justify this decision, the organization asserted its desire to bring rising inflation back to its target objective of 2% in the medium term.
Thus, from next July 27, the interest rates for the main refinancing operations, the marginal lending facility and the deposit facility will be raised to 0.50%, 0.75% and 0.00% respectively.
For the ECB, this is an opportunity to remunerate its monetary policy. And to do this, the ECB has introduced a new “transmission protection instrument” which guarantees the progressive and effective transmission of this new strategy. Moreover, the commission said that the normalization of the rates assessed during the next consultations.
Runaway Inflation Compared to Cryptos
According to data from Eurostat, the statistical office of the European Union (EU), there is real cause for concern. In the euro area, an annual inflation rate of 8.6% was recorded in June 2022, up from 8.1% recorded in May. A year ago, it was around 1.9%. For the European Union, it was 9.6% in June 2022, compared to 8.8% the previous month. The year before, it was 2.2%.
Cryptocurrencies, on the other hand, have the particularity of being very resistant to inflation. Indeed, digital assets such as bitcoin are a safe haven against the value of fiat currencies. To do this, they are based on certain principles such as: scarcity, gradual decrease in supply and non-submission to government actions such as the adjustment of interest rates or the excessive increase in the money supply.
Furthermore, although the recovery of cryptoassets often leads to a decline in prices, on an annual basis, this remains well below the losses caused by the rates mentioned above.
Spread the word, inflation is a cancer. It strikes all layers of society, from households to businesses, from the wealthy to the less fortunate. As with all cancer, the best cure is prevention. Thus, to guard against this, perhaps it would be necessary to consider investing in autonomous and transparent assets that respond to the sole law of supply and demand.
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I came to blockchain out of curiosity and stayed with it out of passion. I was amazed by the possibilities it offers through its various use cases. With my pen, I hope to help democratize this technology and show how it can help make the world a better place.