The Effect Monetary Policy Can Have On Inflation
A very basic but often effective way to help combat inflation is through the use of monetary policy. Monetary policy is where interest rates are changed to try and alter consumer habits typically by moving inflation rates. For example, higher interest rates encourage savers to keep more money in the bank by offering higher yields and those who owe money through loans and mortgages will see their repayments increase unless on a fixed interest rate plan.
What this will lead to is the tightening of the belt for most individuals in the marketplace since more people have loans and mortgages than those who do not. For example, in America more than 60% of homeowners have a mortgage and this figure is even higher within younger demographics. Nevertheless, by reducing the amount of money circulating (outside of banks) the rate of expenditure should decrease and inflation falls accordingly. Whilst there are other economic mechanisms that will also look to slow the rate of inflation monetary policy is usually one of the most effective measures.
However, measures to combat inflation take time and while many analysts believe that inflation has peaked, it is widely expected that high levels of inflation will be seen in the coming months.
The Effect That Inflation Has Had On The Crypto Market
While it is difficult to ascertain exactly the effect that inflation has had on the crypto market as the collapse of Luna undoubtedly caused a significant decline, inflation has left its mark on the ecosystem.
What is interesting, however, is that the effect that inflation had on the broader stock market and levels of uncertainty is arguably more impactful in the decline of the crypto market. Many whales who have leveraged positions across a variety of stocks will have liquidated their crypto to ensure they avoid margin calls on various short positions. Moreover, the likely increase in interest rates which has now materialised will cause loan and mortgage repayments to increase, as highlighted above, and as such have to dip into their crypto funds to help cover the cost.
All in all, there is a ripple effect where once the dominos start falling it is often difficult to stop as the market is inherently a confidence fuelled system. Hence we have now seen the decline across the crypto markets.
Even so, while this may look somewhat bleak to many in the short run, those who truly believe in crypto are using this as an opportunity to eat the dip with the view that they will profit in the long run. The market always recovers and if the adoption of crypto continues to increase as is planned, then those who invest now would be reaping the rewards in the coming years.
What Investments Can Shield Me During High Inflation
There are many good options to help shield you from inflation during this bear market. Your individual risk tolerance level will dictate what investments to look towards, with those who are risk averse looking to Bitcoin (BTC) and Ethereum (ETH) as the two behemoths that will continue to lead the market for years to come. Bitcoin as the premier store of value and Ethereum as a utility project.
Nevertheless, alternative investments through start-ups can offer users a unique opportunity to see a large return on their investment. For projects that bring unique and real utility to the market prices can rise exponentially. For example, Solana which is now a staple within the crypto world was worth less than a dollar in 2020 peaking at a high of $259 in 2021.
One utility project that combines the community-driven benefits of a meme coin with the real world value of utility tokens is RoboApe (RBA). RoboApe is the next generation of meme coin that is currently embarking on its presale and after analysing its whitepaper and use cases alongside its potential appeal to the meme coin community has genuine potential to become a staple like Dogecoin or Shiba Inu.
Combining utility through its NFT marketplace, RoboApe Esports division, and RoboApe Academy which is RoboApe’s platform to help inform and educate users about the world of crypto can become the bridge for onboarding new users while creating a community, and providing utility across multiple domains.
While early stage protocols will inevitably involve higher risk just due to the nature of early-stage projects, the potential gains that could be acquired are far higher than Ethereum or Bitcoin. Nevertheless, as with any investment, it is imperative that you always do your own research.
If you are interested in RoboApe here is a link to another article to learn more.
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