China’s inflation rate has jumped to 4.5 percent for the month of November — highlighting the value proposition of deflationary currencies, like Bitcoin.
China is notoriously hostile to cryptocurrencies, despite its government’s commitment to blockchain. However, it’s recent runaway inflation rate might force those in the country to see the other side of things.
As market analyst Mati Greenspan recently tweeted, China’s inflation rate has been steadily rising. In the month of November, it saw a spike of 4.5 percent — with no indication that it will cease. Considering that China is the world’s second-largest economy, this is cause for worry.
So it begins…
Chinese inflation jumped to 4.5% in the month of November!!
The world's central banks have been pouring an inordinate amount of money into the economy for more than a decade. What did they think would happen? pic.twitter.com/UHYJPiaqjQ
— Mati Greenspan [not trading advice] (@MatiGreenspan) December 10, 2019
China’s central banks have been pouring money into the economy for a long time. Although it has managed to keep a handle on inflation, it seems that trends are working against them now. Although the increased inflation rate will have to establish a new trend to be confirmed as an issue, the spike may point to deep-seated problems with China’s monetary policy.
Deflationary Currencies (Like Bitcoin)
Fiat currencies are often criticized for producing inflation. Monetary policy around the world is tailored towards increasing the circulation of currency, often at the expense of its purchasing power. What this effectively means is that we need an alternative — lest we want to remain in this vicious cycle.
Bitcoin provides us with a deflationary option which has a fixed supply of 21M. Although volatile now, its underlying monetary structure will never change. In a world with competing fiat currencies subject to inflation, Bitcoin could easily serve as a hedge against runaway inflation.
Indeed, such experiments have been tried in economies currently suffering from hyperinflation. Whenever there is hyperinflation in a country or bank runs, interest in cryptocurrency spikes.
BeInCrypto has made this case before as concerns regarding inflation continue to balloon. Some analysts have made the claim that we are entering a ‘new period of inflation.’
The solution to these pressing monetary problems is not a return to old, inflationary fiat currencies. We need global stability and a deflationary asset to act as a basis for how we conceive of value. This is ultimately the promise of Bitcoin.
Images courtesy of Twitter, Shutterstock.
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Source: Be In Crypto