On January 5, the US Federal Reserve released the minutes of a meeting it had with the Federal Open Market Committee (FOMC). Prior to the publication of this document, bitcoin (BTC) and ether (ETH) were already in a downtrend. Will this trend continue over time? According to analysts, the answer to this question is no. They give 3 reasons.
First reason: rising inflation
Last December, the FOMC announced that it expects Fed Funds rates to rise. They would go from 0.90% in 2022 to 1.60% in 2023. That said, although inflation is falling, real rates will remain in a negative trend in 2022. Meanwhile, cryptocurrencies, they, are likely to rise and attract new investors who want to take advantage of favorable market prices.
On the other hand, inflation is a reason why the cryptocurrency market will return to growth. Indeed, it should not be forgotten that digital assets are considered an alternative, since their value is determined by buyers and sellers without government intervention.
Second reason: diminished confidence in fiat currencies
Trust is fundamental to defining the value of fiat currencies. While the dollar index has risen, it only reflects the value of the US currency against the euro, yen, pound sterling and a handful of fiat reserve currencies.
If we measure currencies against the markets of all asset classes, we see that trust has eroded along with the value of fiat currencies. However, since the start of the pandemic in 2020, government authorities have undertaken numerous reforms that have led to a decline in the confidence of users of fiat currencies.
Reason 3: acceptance of cryptocurrencies by several companies
Every day more and more businesses accept cryptocurrency as a medium of exchange. Digital assets reflect the evolution of the FinTech revolution, where technology has finally addressed payments and finance. As trust in governments and traditional banking institutions declines, cryptocurrencies offer consumers an alternative.
Cryptocurrencies are on the right track to become more integrated into the daily lives of individuals and businesses. Indeed, they offer an alternative mode to fiat currencies which are controlled by governments. Moreover, they seem to have the particularity of making it possible to escape the effects of inflation.
Source: Investing.com
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TCT writing
Behind the generic signature “TCT Writing” are young journalists and authors with specific profiles who wish to remain anonymous because they are involved in the ecosystem with certain obligations.
