Santiment data shows that the hottest topics in the crypto social media space involve the Bitcoin Exchange Traded Fund (ETF), the Consumer Price Index (CPI), and inflation.
Medium term cryptocurrency social media trends. | Source: Santiment
Unsurprisingly, discussions about Bitcoin (BTC) ETFs are at the top of the list. Many market participants assume that a spot Bitcoin ETF will soon be approved and that the entire crypto market will be taken to a new level by this newfound accessibility – especially from more strictly regulated financial institutions.
On January 4, the price of Bitcoin fell by over 10% in less than three hours after financial services firm Matrixport published a report suggesting that the US Securities and Exchange Commission (SEC) would close all Bitcoin ETFs this month -applications will be rejected. However, with Bitcoin ETFs dominating the crypto conversation these days, investors might be hard-pressed to find a more appropriate time to recall some of crypto's original ideas.
The Consumer Price Index (CPI) and inflation are a return to the roots of the movement. Bitcoin was born as a revolt against the monetary system built to exploit the masses and create false values out of thin air, a reaction to a fiat monetary system that allows nation-states to print money at will.
The cryptocurrency community is not new to bringing these issues back into the spotlight.
In August 2021, the 50th anniversary of the abolition of the gold standard in the USA by former President Richard Nixon entered the crypto discourse. This decision removed the caps on inflation and uncapped net productivity from the hourly rate.
Net productivity and hourly compensation chart. | Source: Statista
A dedicated website commemorating this event notes that gross domestic product (GDP) growth was also decoupled from wages at this time and income growth was slowing. It is also important to remember that Bitcoin was created in response to the – widespread – consequences of mismanagement in the banking sector and fractional reserve banking, which resulted in private profits but public losses. Bitcoin made this intention clear by incorporating the following headline into its very first block.
The Chancellor is about to bail out the banks for the second time. | Source: The Times
Similarly, the crypto community is now highlighting the downfalls of the current economic system by pointing to the rising prices of consumer goods and the pain of inflation. The 12-month CPI change, according to the United States Bureau of Labor Statistics, shows that prices rose 3.1% on average, 2.9% for groceries and 4% for all other items. Instead, energy costs fell by 5.4% as the world adjusted to the new geopolitical situation that emerged after the start of the war in Ukraine.
Consumer Price Index | Source: United States Bureau of Labor Statistics
Similarly, inflation continues to take money out of our pockets, with the US inflation calculator suggesting that the US dollar has seen 18.6% inflation since 2020. In other words – on average, an item purchased for $100 in 2020 would now be worth 18.6% will likely cost $118.6 instead.
The crypto community today seems determined to defend many of these core ideas, particularly that Bitcoin can be not only a store of value but also a hedge against rapidly rising inflation.
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