Inflation in the Cryptocurrency World: Is It the End of Financial Stability? - Hitecher
Inflation in the Cryptocurrency World: Is It the End of Financial Stability?

Inflation in the Cryptocurrency World: Is It the End of Financial Stability?

by Alex Reinhardt on

Сryptocurrencies news

A venture investor and economist with over 10 years of practical experience in startups and venture capital, a business development expert. Еntrepreneur and founder of over 10 projects in IT and FinTech (financial technologies) with aggregate capitalisation over €100mln including PLATINCOIN and ELVN . World Internet publications — Coin Idol, Bitcoin News Schweiz, Coinspeaker — often feature Alex Reinhardt’s comments on the developments in the crypto market.

Inflation in the Cryptocurrency World: Is It the End of Financial Stability?

Alex REINHARD

The first thing people seek in any economic system is stability. Over the past decade, several waves of the global economic turndown have thoroughly shattered our confidence in the future. And although such events definitely make you stronger, nobody likes to lose money.

What do cryptocurrencies have to do with it?

Inflation of a traditional currency is attributable to increased money supply in a country, which exceeds the real commodity demand. Cryprocurrencies deflationary nature has long been considered one of their advantages, as inflation risks associated with excessive activity of the issuer in the case of cryptocurrencies are simply ruled out. The initial quantity of, for example, bitcoins is limited by the algorithm. That is why, with the mining of the last bitcoin in 2100+ the coins will not depreciate — cryptocurrencies will still be used, but everyone would just know that there will be no more new bitcoins coming.

Cryptocurrencies deflationary nature is a tempting feature that has for a long time made them a perfect option for accumulating and saving money. It would seem that cryptocurrency rates are not tied to traditional market relations, they are not dependent on fluctuations in world oil prices, which means that popular coins, such as Bitcoin, Ethereum, Ripple, Litecoin and others, are by far more stable and better protected than any kind of fiat currencies. It is high volatility (exchange rate instability) inherent in any fiat currency that made people bring their money to the crypto market.

Before and Now

During 2017, the crypto market showed significant growth, and by December it was at its absolute peak raising no contradictions and leaving no doubts that investing in cryptocurrencies was the right thing to do. It was followed by a difficult beginning of 2018, when cryptocurrency prices began to gradually decrease, and their fall is continuing to this day.

To conclude, as a result of changes in the market, cryptocurrencies that appeared to be a panacea for residents of countries with weak economies, in just one year demonstrated «some form» of inflation and ceased to be a reliable safeguard against depreciation of national currencies. People, having believed in bright future prospects, simply started losing their money, sometimes quite large amounts of it, resulting in a dramatic loss of trust in the entire crypto ecosystem including those parts of it that are not directly related to the crypto economy.

On September 11, 2018, Diar fintech and blockchain publication expressed its fears that cryptocurrencies cannot really become a global solution to economic instability. The authors of the published study suggested that cryptocurrencies due to their nature would most likely never be able to become an adequate substitute for fiat money, even more so considering the usual behavior of the modern economic system.

In its study that covered cryptocurrencies such as Bitcoin, Ripple, Bitcoin Cash, ZCash, Nano and others, Diar showed that many coins suffer from the supply inflation or a considerable degradation of purchasing power.

Are there any stable cryptocurrencies?

Let’s imagine that cryptocurrencies are a kind of «new gold». This precious metal, that at some point was also a limited asset as it was very difficult to mine, at a certain stage of global turnover, could not properly perform its function as a payment means any more. Goods turnover grew much faster than gold was produced, which is about the same thing that is happening now with cryptocurrency.

The second nuance is that due to the limited cryptocurrency volumes they will invariably be accumulated within a relatively small group of people, which again will impede the already difficult turnover. Therefore, the coins value will only be decreasing because a currency that can be used as a payment means only by a small group of people or cannot be buy anything real has no value.

If the purpose of investing in cryptocurrencies is not trading and making profit from exchange rate fluctuations, but hedging against a financial uncertainty, one should look for cryptocoins that have well thought-out deflation solutions rather than a set of standard options. One of them is stablecoins, e.g. Tether.

If simple coins are not secured by any tangible valuables, stablecoins do have some assets behind them. However, such legal coins are few and far between in the market.

There is another issue here. Although stablecoins are designed to resist volatility, they are tied to assets that are volatile and low-profit. No company can have 10,000,000 tons of gold, which means that its stablecoin will never be secured enough to compete with the dollar. Moreover, the technology itself does not currently allow for a switch to global, large-scale use of cryptocurrency in local fiat money. All these reasons prevent stablecoin from gaining mass interest. While investors may still be interested in them, it is hardly the case with everyday people.

Eventually, everybody is saying that cryptocurrencies will become a substitute for fiat money, but in fact, there is little chance of that right now. Until volatility can be influenced, the probability of cryptocurrencies replacing fiat money is very small.

How does PLC differ from other coins?

PLATINCOIN has a unique combination of technological features and attributes of conventional cryptocurrencies and «stablecoins».

What is of great importance is its underlying business model that works to ensure the stability of PLC. However, its main valuable asset is its community.

How does the community protect PLC growth?

Any resources on Earth are limited, but people — involved, active, acting sensibly and cohesively — are the most incredible resource and the most powerful force.

It is the PLATINCOIN community that ensures the PLC progress by bringing together more and more people from over 100 countries, through its sustained development, learning and growth. The larger the community, the higher the coin price is.

Gold, silver, shares are all inanimate matter that is unable to make decisions. The price is influenced by people, who can increase the demand by their will power, making a decision to sell or, vice versa, limit the supply in the market.

The main advantage of PLATINCOIN lies in its staircase-like growth. It means that volatility is possible, in other words, the rate can jump up and down, but within one step only. The move to the next step makes the coin unreachable to volatility.

Therefore, PLC is becoming a sort of stablecoin, but its functions enable it to grow virtually to unlimited values as a common unsecured coin.

The community growth is ensuring the coin growth. In the meantime, the infrastructure is being built to make sure that the rate remains stable and does not fall down. So far, nobody has been able to implement this model, not even Bitcoin.

How is PLC protected from speculations?

There are times when coin rates fall dramatically. Remember, for instance, the Bitcoin slump from $20,000 to $6,000. In cases like that, the market is automatically corrected, as they put it, but what happens essentially is that ordinary people lose their money. No matter what anybody may say, it’s true.

When people lose their money, they leave the crypto market. As of today, the drop from $20,000 to $6,000 burnt down the market by almost 75%. PLATINCOIN is not susceptible to things like that, as it does not involve a short-term speculation element.

A person who believes in PLATINCOIN does not respond to manipulative tactics. Therefore, all his actions are measured, well thought-out and strategically correct. The staircase-like growth protects us from a situation where the coin burns down its own community. Bitcoin again gives us an example of such situation: everyone believed in it, invested in it, it collapsed and everybody left it. By contrast, people come to PLATINCOIN for a long time. They just watch the coin grow for three years without any significant drop in the rate, being able in the meantime to make money and develop in several other ways.

PLATINCOIN’s development strategy is not a closely guarded secret. We present it to our community at our big events. We talk about it at international crypto forums. We are ready to share our experience, learn from other people’s experience, cooperate and continue to develop. And we boldly and openly say that we work for our community and its interests, doing everything we can to ensure its growth and prosperity.

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