Stagflation is a comparatively uncommon state linked to economic stagnancy. Inflation that comes along with economic development contrasts with stagnation.
Price grows as an increase in economic output is when inflation takes place. When the state does not expand quickly enough to satisfy people’s needs, economic stagnation results.
High inflation and underdevelopment of the economy are both signs of stagnation. Since these circumstances are typically contradictory, the term “stagflation” might be understood as an opposition.
The consequences of such state
Stagflation occurs when the economy expands so slowly that unemployment levels go up. Prices are also rising, as if businesses were selling all they had. The decrease in demand for goods and services could lead to an increase in unemployment.
Bitcoin can be viewed with the aforesaid understanding as a conventional stock, which has always acted as a fence against rising prices. In fact, Bitcoin can, of course, be a good shelter from inflation, though it is not so simple to understand at first sight.
First of all, Bitcoin is a redistributed, worldwide payment method that is not governed by any centralized body. Because the state has no influence on it, it is largely resistant to possible corruptness and monetary system influences.
The number of Bitcoins in operation is also on a declining trend, halving every four years, making it a rare commodity with a maximum of 21 million coins in circulation. It is also referred to as electronic gold today because of its rarity and finiteness.
Risky asset prices typically decrease as interest rates rise
Much is dependent on whether and if Bitcoin influences the stock market’s strong correlation with the cryptocurrency market. Taking institutional approvals into account, this process could take some time.
Adoption of Bitcoin and other cryptocurrencies could be fueled by stagnation. If the economy we are creating through debt turns out to be unsustainable, this might occur.
If BTC is perceived as an alternative or hedging to an imperfect finance-related framework, it could see higher costs and acceptance during times of uncertainty.
When public confidence in Bitcoin surpasses public confidence in the current economic system, a tipping point may be reached.
