This article is a reminder to buy altcoins now not Bitcoin.
Inflation is a trending crypto narrative and Bitcoin is often seen as a hedge against inflation.
However, crypto experts recommend buying altcoins now rather than Bitcoin.
Keep reading for more details.
Bitcoin as a Hedge for Inflation
Two terms are relevant here – Inflation and Interest rates. Let’s define them and understand the relationship between them.
Inflation is when a currency like the dollar or Euro loses value over time, causing the price of goods to rise. Also, it means that a large amount of the money is in circulation hence the drop in value.
Interest rate is the amount charged over and above the principal amount by the lender from the borrower.
Interest rates are mainly determined by central banks that actively commit to maintaining a target interest rate.
They try to control the interest rates to reduce inflation in an economy.
In other words, when there’s inflation, they increase the interest rate so that people will borrow less and save more.
When people save more, the amount of money in circulation reduces, thus, reducing inflation.
At the same time, the prices of goods rise, leading to a high cost of living.
On the other hand, As interest rates fall, so does inflation. It becomes less expensive to borrow money, thus, there’s more money circulating in the economy.
Because of how inflation reduces the value of fiat, people prefer to invest in Bitcoin which is not affected by inflation.
But the government knows that people choose Bitcoin because of inflation so they increase interest rates to reduce inflation.
When this happens, people whose money is locked in Bitcoin are forced to sell it so that they will have cash to spend.
At this point, fiat appears stronger, and investors are compelled to leave Bitcoin and invest in bonds.
This was a major reason for the bear market of 2022 when the Fed increased interest rates.
The state of things as of June 2023
Judging from the image above, interest rates have increased in the past year.
And recently, the SEC has termed many cryptocurrencies security even if it is not true.
It appears to be intentional as this development is driving capital out of crypto.
Investors are forced to move their money out of crypto because of the uncertainties in the system.
Even, some exchanges have deleted the cryptocurrencies termed security.
Financial analysts have observed that there’s no new cash within crypto and this may persist till the end of the year.
Additionally, reports from the just concluded FOMC meeting reveal that inflation is on the increase, and interest rates may not be raised.
*[FOMC stands for The Federal Open Market Committee a.k.a The Fed]
Now that you have gotten the background of events, let’s why this is a good time to buy altcoins.
Why you should buy altcoins now
According to industry analysts, leading economic indicators point to a recession.
If this happens, many will be forced to lose interest in crypto and focus on survival.
In the meantime, investors are still holding onto their Bitcoin as inflation continues to rise.
However, there’s no new cash flowing to crypto, so, for the rest of the year, we may only see sideways movement in Bitcoin.
Therefore, we can’t expect a bull market until the Bitcoin halving is completed in mid-2024.
Also, it means that altcoins won’t be doing 5x, 10x, and so on at the moment.
Bitcoin dominance will probably continue and the next bull cycle may not be as big as the previous ones we have seen.
That is why you should buy altcoins now at a fair price, such that when the bull market comes, you’ll start bagging the 10x profits and more.
Meanwhile, Bitcoin holders will wait for a favorable economy before they will start counting profits again.
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