What happens during a period of inflation?
Inflation is the process in which the currency of a country loses value at different levels. One unit of each currency purchases less food or other goods than before. It is usually expressed as a percentage.
High inflations can have disastrous consequences for the economy of a country. It can be extremely difficult for citizens and businesses to buy products from abroad. In addition, many people switch to alternative payment options such as gold.
Although the consequences are somewhat different from those of central bank money, cryptocurrency can also be a part of this phenomenon.
How does inflation develop?
Many economists believe that an inflation rate of about two percent can benefit the economy in the long term. If this rate of a country falls below this benchmark, additional money is often printed to artificially generate inflation.
On the other hand, it is always dangerous if it exceeds this value or even rises to double-digit numbers. Countries that experienced high levels in recent years are Argentina, Zimbabwe and, most recently, Turkey.
Cryptocurrency inflation means that with the same amount of coins, fewer end products can be purchased in stores.
It has some advantages for an economy, but in the worst case can also lead to great poverty. History has shown that, sooner or later, each country can expect to experience it at least for a short time.
Itis also a possibility with cryptocurrencies, although it hasn’t happened yet, and of course ivestors are happy about this fact.