There is a growing fear of stagflation in the world, and many investors are turning their attention to Bitcoin and other digital currencies.
It has been said many times that coronavirus has huge impacts on the global economy, and states are making every effort to mitigate the effects. Some attempts work better than others. Unfortunately, the truth is that the pandemic is still affecting world markets. In some sectors, the pandemic has caused irreparable damage.
Countries are afraid of stagflation. Stagflation is a situation, where the economy is falling sharply but inflation is rising.
Are digital currencies able to handle stagflation?
Bitcoin recently reached $ 12,000. So the debate begins as to whether BTC will be able to handle the needs of institutional investors. There are several problems with investing in Bitcoin, one of them is high volatility of its price. Other problem is that it is solely the investor, who is responsible for the security of his funds and also possible mistakes.
Besides Bitcoin there are also other digital currencies that tried to solve these problems, with higher or lower success rate. One of the problems here is how to choose a good project to invest in.
There are other assets, historically proven, to be used in times of economic crisis, one of them is gold. Gold has always been a helper in recession or inflation, but to the relatively higher correlation of BTC, we can assume that both BTC and gold can be used as an aid against stagflation.
Bitcoin is heading for a new bull run. If it returns to $ 12,000 and holds this level, we can look forward to going to $ 15,000. Other digital currencies usually tend to follow the lead. The pandemic impact on the global economy will be huge, we just don’t know how exactly. No one dares to estimate how the economy will turn out in the long run. It would be only wise to invest in various types of assets that are not as prone to inflation as fiat money, either in cash or on accounts.