Quick take
1 minute read
- Despite what many of you may believe, bitcoin is not completely protected by the depreciation of Fiat currencies.
- With the leading cryptocurrency increasing its value over the past 10 years, a new report indicates that it could’ve been overstated due to the accompanying inflation of the Fiat.
Despite what many of you may believe, bitcoin is not completely protected by the depreciation of Fiat currencies. With the leading cryptocurrency increasing its value over the past 10 years, a new report indicates that it could’ve been overstated due to the accompanying inflation of the Fiat.
Given that bitcoin is dominated in the US dollar, it is very much possible for it to be subject to depreciation.
Following the economic crisis of the late 2000s, the United States saw some of the lowest inflation rates in history and it was around 2% yearly. It’s over the past 10 years, that this has increased slowly, but surely to 20% and as a result, if you use the 2010 US dollar as a starting point, the current price of bitcoin (hovering around the $10,500 mark) is in reality just less than $9000.
But before you freak out, this does not mean that bitcoin was a bad investment but it also doesn’t mean that it was a good store of value.
If the inflation rate for Fiat currencies stays relatively low (which is quite unlikely) and bitcoin is able to continue appreciating at a quick pace, the effect of the Fiat inflation may be made redundant in this scenario.
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