Inflation vs Appreciation

by Bill White, CEO of YAFFTR


Whether it’s dread of the never-ending march of inflation or an expectation of a high return on your investment, the rush to buy cryptocurrencies in recent years has driven millions of people to finally wake up and smell the coffee.


Investors who fear the risk of inflation, which has plagued every fiat currency since before Abraham, understand that the dollar they earned yesterday buys less today and will buy even less tomorrow. Fact Check: Inflation is never going away.


These same people who know about the erosion of their fiat currency through inflation also understand that the popularity of #Bitcoin, #Dogecoin, and other cryptocurrencies, with more than $1.1 Trillion in market capitalization, as of today, has generated considerable growth, or appreciation.


Runaway growth with some cryptocurrencies has been fuelled by a belief or perhaps anticipation (read: desire) that cryptocurrencies will eventually replace all or most fiat currencies. This belief is supported in part by the apparent instability of fiat currencies, the considerable and growing debt owed by nations around the world, and the attractive anonymity of crypto transactions.


But there’s a problem or three.


As you will have noticed all cryptocurrencies are compared to one or more fiat currencies. When you look into your real-world wallet or purse and see a few dollars or a five-pound note or two you don’t say to yourself, Ah!, that’s about so many _______ (pick another currency). Unless and until crypto has a value on its own merit it will not be used by the general public as a true replacement currency.


If there really is unsurmountable inflation in the near future, and let’s assume you were astute enough to buy a sufficient number of Bitcoin or another cryptocurrency, when you finally decide to ‘cash out’ you’re going to be forced to buy an inflated fiat currency, thereby wiping out a portion if not all of your appreciation (read: profit).


Worse still, as businesses slowly begin to accept cryptocurrency, and should you decide to purchase something with the coins or tokens you have bought with your fiat currency, and if it’s true that the value of your coins continues to rise, you’re actually overpaying for whatever you’ve bought. In one extreme example, in May 2010 Laszlo Hanyecz bought two pizzas for 10,000 Bitcoins (valued then at around $41) and not a bad price when you need a couple of pizzas delivered. Today, those coins are worth more than $366m.


In other words, if the cryptocurrency that I bought yesterday will buy more tomorrow why would I spend it today?


But there is a solution to these problems.


More on that later.


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Bill White is CEO of YAFFTR Limited