Usually, cryptocurrencies are considered a haven from economic instability. Cryptomnesia advertises digital assets as the best way to avoid hyperinflation and devaluation of national currencies.
Which cryptocurrency is best suited for this task? It turns out that no. Specialists of the research group Diar argue that none of scriptactive fails to protect the economy from financial shocks. Most digital currencies — even such well-known as Dash and litecoin, suffer from arbitrarily inflating the supply and reducing global purchasing power.
In other words, cryptocurrencies are worthless when it comes to the fight against inflation, if we consider their average performance. For some major projects, they are listed in the following table:
That cryptocurrency has brought at least a small benefit to the population of the country with a weakening economy, its purchasing power should be relatively stable compared to the rate of the national currency, which it aims to replace. Research center showed that almost all the major cryptocurrencies suffer from some form of inflation. It casts doubt on their potential as safe havens. The authors of the study write:
“We calculated the actual rate of inflation, which measures loss of purchasing value. In other words, the rate of inflation determines how much of real goods you can buy for a given amount of cryptocurrencies. If inflation is positive, the purchasing power decreases and Vice versa. Over the past year, deflation can only be called bitcoin, Ripple, Nano, EOS, Stellar, Cardano and IOTA. All other cryptocurrencies showed some inflation. By deflation in annual terms was Nano and Stellar. However, if we consider purchasing power since the beginning of the year, absolutely all the major cryptocurrencies demonstrate its reduction”.
In fact, this means that cryptocurrency is very bad cope with economic shocks. Data Diar show how digital assets are useless for protection against economic instability.
For example, price inflation Dash with the beginning of the year was 84%. The investor who bought at the beginning of the year Dash for $10,000 today will be able to sell it for only $1600. So Dash would be a extremely bad choice as an alternative store of purchasing power (even for the population of the poorest countries).
Even bitcoin, which the center calls one of the least inflationary scriptaction, suffers from inflation. In 2018, its purchasing power has dropped by more than 50%. Since the beginning of the year holders of bitcoins lost more than half its States. Even the Turkish Lira, the recently cheapened almost twice, — the best protection against inflation than bitcoin.
Think about this the next time someone will claim that crypto-currencies are “safe haven” from economic crises.
For those who definitely wants to use cryptocurrency to protect against economic instability, Diar advises to pay attention to projects with a predetermined generation algorithm.
Simply put, you should choose the coins offer which will not change in the foreseeable future. These include NANO, IOTA and Cardano. All other platforms, including bitcoin, litecoin, Monero and Bitcoin Cash, the annual rate of inflation exceeds 2.5%, making them unsuitable for long-term storage of purchasing power. The researchers conclude:
“In times of economic uncertainty can be expected that people will prefer a game with a specific generation algorithm. Although the future value is impossible to guarantee certainty of supply — an obvious advantage compared with the unpredictable financial decisions taken by a small group of developers”. Discuss current news and events on the Forum
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