Cryptocurrency Correlating to Inflation

How Does Cryptocurrency Relate to Inflation

Cryptocurrency is one of the closest topics that relate to inflation that I could find amongst classmates’ blogs. The reason that inflation correlates is that inflation has to do with money in the cash form losing its value. Like I have referenced in prior blogs, peoples money loses value simply by staying in the cash form. One of the ways to combat inflation is putting your money into stocks, bonds, investments, or some sort of form that can gain wealth over time. Kyle’s blog suggests that everyone should convert all money into cryptocurrency. He mentions that “1 bitcoin equates to almost seven thousand dollars today. An investment year’s back could have earned you thousands of dollars.” This strategy would directly combat inflation being that one who invests their money would see an increase that would only not be there if someone was to keep their money in cash form in their pocket.

Could There Be a Downside?

Investing money in cryptocurrency is not a completely safe bet. The fact that it is a brand new form of money means there is not a much history on whether or not it is a safe place to invest your money. To me, cryptocurrency is not entirely safe, but it does have the upside of creating more wealth than leaving your money in the cash form and not letting it have the chance of growing exponentially. However, if it were to happen that everyone converted their wealth and earnings into cryptocurrency, I’m not sure what kind of effects it would have on money as a whole seeing that as of right now, it is only an option to invest into cryptocurrency and not a mandatory investment. I’m not sure what would happen if there was no cash and all the money was in the form of cryptocurrency. I think it would be a different situation than it is now seeing as it is entirely up to people if they want to invest in this form of money. I think that if a universal conversion into cryptocurrency may have some upside, but if everyone has to convert, then there may not be as much risk involved which means there may not be as much reward seeing as more risk equals more reward.

Hughes, K. (2018, September 24). The Uprising of Cryptocurrency — Kyle Hughes — Medium. Retrieved from https://medium.com/@khugs28/the-uprising-of-cryptocurrency-f90ddbab4326