: Since inflation (both in the US and worldwide) keeps rising with high rates, why do deflationary assets like BTC and ETH stay the same in price / dump?
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Because crypto is an asset with no real intrinsic value. No one actually wants a bitcoin for themselves, they just want a bitcoin in the hope they can sell them to someone else for a higher price later.
And people are realizing that, it doesn’t have to do with inflation, it has to do with it basically being speculating.
The crypto crash has more to do with crypto being a catastrophically bad form of “currency” than it has to do with inflation
Because when people, as a whole, have less money, they’re less likely to waste money on pyramid schemes.
Cryptocurrency has very little “liquidity” compared to, say Dollars. There are a bazillion dollars out there, so the prices relative to other goods, go up and down relatively slowly. When we talk about bad inflation we are talking about less than 10% a year.
There are a lot less Bitcoins and ETH lying around. That means they are less “liquid” and less liquid currencies can move up and down by much higher. Cryptocurrency just went up in price much, much more than their actual value due to currency speculation. Crypto really has no intrinsic value, and it’s price is only based on whatever people think it is worth. If all of a sudden people think it is too cheap, it will spike up quickly. If people think it’s to expensive, it can plunge to nothingness very quickly.
During scary economic times, people tend to run toward “quality” assets (asset which either have intrinsic value or can be converted to items easily), and cryptocurrencies aren’t very high quality. Even if they are inflated dollars, you can pretty much spend them everywhere in the world, and in some countries dollars are preferred over the local currency.
There has long been speculation that it could be a hedge against inflation because of how the code is structured but the amount of wealth in crypto is still far too small for this to be viable.
As a hedge against inflation, it’s a chicken and egg problem. You *do not* want to use a volatile asset as a hedge against inflation because the reason why you hedge is to escape volatility.
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