Inflation, Ukraine’s crises irk markets as crypto soars
Things look good for crypto regardless of the continued volatility. Every market is reacting erratically to the historically high inflation, Ukraine invasion, and the expected decision of the Federal Reserve to raise interest rates this week. President Biden’sBiden’s recent executive order throws light on increasing regulatory clarity. There is also the crypto’s ongoing role in supporting Ukraine to the E.U. parliament voting against the bitcoin mining ban.
Why aren’t prices rising as U.S. inflation continues to rise? Bitcoin was designed to be inflation resistant, hence its nickname “digital gold,” – so why aren’t prices rising? According to data released last week, the Consumer Price Index in the United States jumped 7.9% in February, the highest level in 40 years. However, according to the digital gold narrative, Bitcoin has been trading more like a tech stock than a precious metal as the Federal Reserve prepares to raise interest rates and wind down pandemic-era support. As that pool of easy money evaporates, speculative assets of all kinds (regardless of supply) lose a significant boost.
The invasion of Ukraine is putting more pressure on markets. Still, crypto’s role in assisting Ukraine is a use-case that may be enticing consumers to the broader crypto business, with roughly $100 million raised so far to provide Ukraine with fuel, food, and protective vests. At the same time, investors have been pouring money into cryptocurrency funds and firms, with $4.4 billion invested in the last four weeks. Global investors want exposure to a sector many feels can withstand the consequences of the Russia-Ukraine crisis.
President Biden’sBiden’s much-anticipated executive order on crypto, which emphasized the need to reinforce U.S. leadership in the global financial system and technologically and economically while encouraging agencies to consider the best ways to protect consumers, led to a brief rise in crypto prices. The decree also calls for the investigation and construction of a “digital dollar” in the United States (around 100 countries are exploring or piloting similar technology).
Like Arizona, Colorado, and Wyoming, several states are exploring their own crypto-friendly legislation. The European parliament defeated a proposal to ban Bitcoin; South Koreans elected a pro-crypto president who promised to rework “unreasonable” rules. Dubai established its first crypto law, aiming to create the “greatest business environment globally.”
As we all deal with historically high inflation, there’s plenty of advice available, including from the world’s wealthiest person. What is Elon Musk’sMusk’s opinion? “When inflation is strong, it is often better to own physical assets such as a home or shares in companies you believe provide good products than currency.” “Fwiw, I still own and will not sell my Bitcoin, Ethereum, or Doge.” Meanwhile, the crypto community is expanding: over 40 million Americans have invested in, traded, or used cryptocurrencies. The president’s executive order acknowledged this reality and the critical role crypto may play in the future of the United States’States’ financial system.