Everything You Need to Know About Bitcoin and Inflation

Fiat currencies quickly change in value based on central banks’ regulations. Contrarily, bitcoin will become less likely to undergo inflation since it has a fixed maximum supply of 21 million coins. These coins are also distributed to carry out projects within the bitcoin ecosystem. Some of these coins can also be obtained freely through a BTC faucet.

However, bitcoin may not be subject to inflation, but other economic growth can influence its price. For instance, when currency values reduced during the pandemic in 2020, bitcoin and other assets, such as real estate and shares, increased in value.

With the vast opportunity of making free cryptocurrencies, people with no coins in their wallets are encouraged to participate. According to research, the decentralized form of payment gained about 250% market growth during the fall of fiat currencies. It was also revealed that the rate of BTC faucet users increased as they endeavored to earn free cryptos.

What is Inflation?

Inflation often applies to fiat currencies that lose purchasing power for an extended period. The items will be expensive due to the excess money supply. This also implies that excessive money is in circulation, more than needed. Inflation can affect several economic sectors, including food, housing, medical care, and automobiles. Unfortunately, basic human needs can also be affected by inflation.

Inflation is a huge situation that could cause a massive drawback to a country’s economy. To stabilize inflation effects, each country introduces new monetary policies. For instance, if the inflation rate in the United States rises above 2%, the system is expected to introduce new policies.

However, inflation is never a forever crisis. Inflation will continually rise if the supply and demand of most consumable goods or products do not balance appropriately. Meanwhile, a country’s quality of financial decisions determines how long inflation will last.

Bitcoin as an Inflation Resistance Asset

In past years, gold has mainly been considered the only inflation-resistant asset. However, the narrative has altered since cryptocurrencies were introduced. Bitcoin provides a good hedge against inflation. If bitcoin’s value keeps increasing against fiat currency, it can withstand tight economic situations.

Even though bitcoin exhibits high volatility, it is best considered a long-term investment. This implies that the opportunity to earn free BTC plays no negative role in the crypto market growth. Here are reasons why bitcoin holds a long-term value, even when the BTC faucet was introduced.

A Secured Financial Asset

Bitcoin is one of the most secure assets among several others. Since bitcoin is decentralized, users can store as much as possible in their crypto wallet. The transactions are anonymous and not revealed to any third party. The portable size of bitcoin also makes it easy to transfer to another blockchain system.

Limited Supply of Bitcoin

Every bitcoin payment or online transaction is carried out with the BTC token. Thus, if more than the limited number of BTC tokens is in circulation, it may cause inflation. However, bitcoin is regulated so that new coins cannot be launched into the digital space until the stipulated period.

Non-Association with Any Particular Currency

It is true that some currency values, such as the Dollar, may influence the bitcoin market rate, but they are not directly dependent on each other. Bitcoin performs a definite operation and is not tied to any country’s currency. This also minimizes its exposure to political strategies or risks common among stock markets.

Advantages of Bitcoin Limited Production Supply

Once a digital coin is scarce, it will reduce the inflation rate. However, this makes people wonder if bitcoin can be deflationary. Bitcoin will only experience deflation if the production volume decreases. Meanwhile, bitcoin is projected to achieve a disinflationary stage, mimicking the gold policy. Thus, it will lead to a stable market rate.

The crypto community is forceful, and market sentiments are a critical aspect of a crypto ecosystem. Even though bitcoin is set at a maximum supply rate, it does not protect it against the general market condition. This implies it can respond to ongoing market sentiments.

Can Bitcoin Experience Inflation?

The concept behind the bitcoin blockchain is complex. Even if the cryptocurrency will ever experience inflation, it will be in a minute amount. Every distribution has been considered in the maximum supply rate, including free coins on faucet websites. Thus, only some gaming websites are legalized to play a BTC faucet. Once you can identify one, you must perform simple tasks such as solving puzzles, loading the captcha, viewing ads, and many others.