The value of major cryptocurrencies has been making a strong recovery over the past few months, with the prices of major assets having risen significantly from the lows of this cycle.
Ethereum’s reduced issuance is good for altcoins
After EIP-1559 and the merge, the issuance rate of Ethereum has been decreased significantly, which has meant that the inflation rate is now extremely low – in times of high network congestion, the annualised inflation rate can even sometimes turn negative.
Given that the majority of altcoins are traded against ETH (particularly those traded on decentralised exchanges), bullish price movements in ETH act a tide that lifts all boats for the ERC20s that are traded on top of it.
Inflation looks the only way out for the Federal Reserve
Whilst the Federal Reserve may be pretending that hiking rates to deal with debt and reduce inflation is an option, the reality is that the Federal Reserve has no option but to continue to devalue the dollar in order to keep the economy relatively afloat.
Many analysts, such as Dan Tubb, believe that the only plausible thing for governments and central banks to do in such an over-leveraged system is to inflate the problem away, given that raising interest rates and raising taxes to levels that would cripple the economy is not a politically viable option – the Federal Reserve can make an attempt to control inflation a little to dampen its effects, but it is highly unlikely that Powell will be able to channel the ghost of Volker to raise rates to double digits.
In an inflationary environment, scarce assets such as Bitcoin and gold tend to perform relatively well, as the unit of account (fiat currencies) becomes steadily more devalued.
Speculators are currently betting on the Federal Reserve not continuing to raise rates indefinitely, as inflating their fiat-denominated debt away seems the best option if the alternative is total economic collapse.
Crypto adoption and education continues to grow
One of the main catalysts for future rises in the prices of key crypto assets is the fact that education and their proliferation is becoming more widely spread all the time.
In 2021, El Salvador declared that Bitcoin would be treated as an official currency alongside the dollar, and their president has been very vocal in talking to the media about the benefits of such a system, and the ways in which the Federal Reserve’s policies of extreme quantitative easing are inefficient and immoral.
Full interview with Tucker Carlson https://t.co/wDd5ygMKVM
— Nayib Bukele (@nayibbukele) November 3, 2022
Shortly after El Salvador made the declaration, other countries followed suit, and Bitcoin was also made legal tender in the Central African Republic, and there are many plans for the policy to also be adopted in Honduras, Nicaragua and Guatemala.
CBDCs are a great advert for Bitcoin
As understanding of Keynesian economics and the fiat currency system continues to grow, people around the world are seeking to reclaim their sovereignty by opting out of politicised money.
Nowhere in the world has this been made clearer than the phenomenon of the eNaira in Nigeria.
As one of the most populous countries in Africa, Nigeria’s experimentation with a CBDC was supposed to be a huge success.
However, the fact that the eNaira isn’t quintessentially different from the Naira other than that those who use it have even worse property rights than before wasn’t an appealing proposition.
Last year, Nigeria launched its much-ballyhooed eNaira, Africa’s first central bank digital currency (CBDC).
The jury is now in.
The eNaira has been a massive failure.
Here’s what really comes next…
Hint: it’s not what the elites hoped for
— Nick Giambruno (@NickGiambruno) November 2, 2022
Bitcoin penetration is extremely high in Nigeria, with approximately 40% of the population using it regularly, and the eNaira has proved to be a total failure, with only 0.5% of the population using the state currency.
The catastrophic failure of the eNaira, and the huge success of Bitcoin, has meant that many countries looking for stability in the future are incentivised to adopt Bitcoin rather than a totalitarian CBDC.
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