Once again this year, we would like to sweeten the Advent season for our readers with an Advent calendar. In a slightly different form, each door contains a “knowledge bomb”, which will be supplemented with an extraordinary special prize on Christmas Day.
Behind the eleventh door is the term “inflation”. To enter the giveaway on the 24th, simply take part in the polls and like the respective Twitter posts.
Inflation
Global inflation rates hit high waves in 2022. This circumstance forced both the European Central Bank (ECB) and other central banks to raise interest rates for the first time after more than a decade of falling rates. At the same time, Federal Reserve Chairman Jerome Powell expressed his intention to use any instruments to curb inflation.
In economics, inflation refers to a general increase in the prices of goods and services in an economy. When the general price level rises, each unit of currency can buy fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money.
Bitcoin has a clearly predefined monetary policy with a decreasing inflation rate. This makes the cryptocurrency very different from common fiat currencies. In an environment of rising inflation rates, the digital currency is therefore increasingly coming onto the radar of institutional investors as a potential hedge. This is because, despite short-term liquidity concerns in a high interest rate environment, the laws of supply/demand operate in free markets. Thus, similar to gold, Bitcoin benefits from a depreciating denominator – at least in theory. The final fire test was initiated with the Federal Reserve’s change of direction just under a year ago.
