Change crypto to cash hurt

Fortune favors the brave. Recently, people have been selling it — causing the price to crash. Darren Rovell recently crunched the numbers. Oh well.

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Content:

• Why interest rates, stocks and crypto are sometimes correlated
• Bitcoin vs. Gold: 10 experts told us which asset they'd rather hold for the next 10 years, and why
• The U.S. Government Is Targeting Cryptocurrency to Expand the Reach of Its Financial Surveillance
• Crypto crash hurts athletes like OBJ, who converted NFL pay to Bitcoin
• Washington is rushing to regulate crypto. It’s a mess.
• Here’s Why Bitcoin May Get Hurt by PayPal Shares Dropping 25%, Peter Schiff Opines
• Could Index Funds Be ‘Worse Than Marxism’?
• REVIEW: Bitcoin Widow: Love, Betrayal and the Missing Millions
• Are Cryptocurrencies Harming the Environment?

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Why interest rates, stocks and crypto are sometimes correlated

The argument is that central bank money printing will lead to inflation or the decrease in the value of money over time. Bitcoin, by contrast, has a fixed limit of 21 million coins that can ever be created. This limited supply allows bitcoin to resist inflation.

The COVID pandemic presented the ideal conditions to test this theory once countries across the world began injecting trillions of dollars into their economies. Many countries, including the U. Yesterday, the chairman of the U. Federal Reserve, Jerome Powell said the central bank welcomes higher inflation in as a sign that the economy is picking up again after the pandemic-slump. Governments hoped an expansionary monetary policy, whereby central banks increased the amount of money available to people, would keep economies moving amid prolonged shutdowns of certain sections of the economy.

These gains were partly influenced by traditional investors who saw bitcoin's potential to work as a hedge against inflation. In fact, U. Others think a little post-pandemic inflation might even be a good thing. The U. Federal Reserve defines inflation as the increase in the price of goods and services over time, but many associate it with a change in the money supply , or the total amount of money in circulation.

The crypto argument — that printing more money leads to inflation — does sound compelling, Michael Ashton, inflation consultant and JPMorgan alum, told CoinDesk. When there is a change in the relative quantity of two goods, the one that is increasing in quantity tends to get cheaper, he said, adding that this happens with foreign exchange all the time.

The reason why the Mexican peso has been cheap relative to the U. Because here are a lot more pesos than dollars out there, he explained, the value of the peso in exchange markets goes down. Calvo said the view that you can control the price levels of goods and services through money supply is not limited to the crypto world but shared by investors in general, and for good reason. When you look at many countries over a long period of time, you can see some association between the increase in money supply and inflation, Calvo added.

But Calvo, Coppola and Ashton all agree that increasing the amount of money in the economy — with a stimulus package, for example — does not guarantee a rise in price levels. In , despite inflationary fears due to pandemic-related spending, the U. One explanation for the relative stability of U. After the pandemic hit, consumer spending suffered around the world, with countries including the U.

As multiple states in the U. People spending less meant the demand for goods and services in general had dropped. The World Bank, in fact, projected a fall in global commodity prices.

It is under these prevailing conditions that the U. Ashton explained this may be because money velocity is very low. People are not getting rid of U. So, mathematically, you have to have a declining money velocity. Some investors may be looking at countries like Argentina and Venezuela where printing money has led to very high inflation. Therefore, there is a risk that it could happen in the United States; therefore, we need to invest in things that will protect us from that inflation, if it happens.

Venezuela and Argentina are hyperinflationary economies where price levels grow rapidly and excessively triggered by an increase in the money supply or a shortage in supply relative to demand. In Venezuela, for instance, printing money led to jaw dropping increases in food prices last year. In hyperinflationary countries, years of political and economic instability have exhausted the option of printing money without leading to uncontrollable inflation, Calvo said. Coppola added that countries struggling with hyperinflation have other contributing issues like high foreign exchange debt, war, occupation or something political.

Argentina, for example, has had a long and complicated economic crisis riddled with astronomical debt obligations and political instability that often has citizens scrambling to convert their Argentine pesos into sturdier assets or currencies. Nothing happens. Argentina doesn't have that privilege. Interestingly, the pandemic has not particularly spurred inflation in Argentina either.

By mid, inflation in Argentina had reached a two-year-low, according to a Focus Economics report. So naturally, investors are reacting to all the inflation doom and gloom by betting against it , turning an alternative asset like bitcoin into the breakout star of inflation hedging in the process. Bitcoin inherited a lot of the same selling points that made gold a preferred inflation hedge like scarcity and portability, according to J.

Koning, Canadian financial writer and founder of the popular blog Moneyness. The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group , which invests in cryptocurrencies and blockchain startups.

As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights , which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG. Sandali Handagama. By signing up, you will receive emails about CoinDesk product updates, events and marketing and you agree to our terms of services and privacy policy. Crypto enthusiasts often talk about bitcoin as a hedge against inflation.

What is inflation, anyway? It depends on whom you ask. Money is printing, is inflation soaring? Not really, at least in the U. What about outside the U. But in the countries they are looking at, things work differently, Coppola added. But when it comes to serving as a hedge against inflation, bitcoin is hardly alone. Subscribe to First Mover, our daily newsletter about markets. Sign Up.

Bitcoin vs. Gold: 10 experts told us which asset they'd rather hold for the next 10 years, and why

In January , QuadrigaCX, the largest cryptocurrency exchange in Canada, went belly up after its founder, Gerald Cotten, died under bizarre circumstances in India. Investigations revealed that Cotten had been running Quadriga like a Ponzi, treating customer deposits like his own personal slush fund. The timing of his death was peculiar, as the clock was ticking on his Ponzi. Cotten was struggling to keep up with customer withdrawals. Instead of getting caught and going to jail, he died and went to heaven.

The U.S. Government Is Targeting Cryptocurrency to Expand the Reach of Its Financial Surveillance

David Gura. This illustration photograph taken on July 19 in Istanbul shows a physical banknote and coin imitations of the Bitcoin cryptocurrency. Regulators such as Securities and Exchange Commission Chairman Gary Gensler are promising tougher action for cryptocurrencies. For many people, cryptocurrencies like Bitcoin are part of an exciting and lucrative new financial frontier. But for the country's top market watchdog, Gary Gensler, they seem "like the Wild West" — and he's promising a crackdown. The market for cryptocurrencies has ballooned. Amateur investors, particularly younger ones, have started buying and trading cryptocurrencies, attracted to the thrill of big returns.

Crypto crash hurts athletes like OBJ, who converted NFL pay to Bitcoin

The past decade has seen cryptocurrencies rise from relatively unknown fringe currencies to headline-hitting digital assets capable of shaking up the financial industry. These currencies have recently become one of the most valuable assets on the planet , and experts predict that coming years could continue to see their usage surge. One of the key problems of cryptocurrencies lies in the environmental impact that digital transactions have. The process of mining for bitcoin is particularly energy-intensive, due to the complex mathematical calculations that must be completed to create each and every new bitcoin.

Washington is rushing to regulate crypto. It’s a mess.

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Here’s Why Bitcoin May Get Hurt by PayPal Shares Dropping 25%, Peter Schiff Opines

Learn more about Climate Week, read our other stories , and check out our upcoming events. Image: fdecomite. Because some bitcoin investors have become millionaires overnight, more and more people are intrigued by the possibility of striking it rich through investing in cryptocurrencies like Bitcoin. A cryptocurrency is a virtual medium of exchange that exists only electronically; it has no physical counterpart such as a coin or dollar bill, and no money has been staked to start it. Cryptocurrencies are decentralized, meaning that there is no central authority like a bank or government to regulate them. The advantage of this is that there are no transaction fees, anyone can use it, and it makes transactions like sending money across national borders simpler.

Could Index Funds Be ‘Worse Than Marxism’?

By Paul R. New York CNN Business Bitcoin prices have been on a wild ride this year, and they are set to finish sharply higher than where they began it. Bitcoin and other cryptos may become a little less volatile in By Paul R.

REVIEW: Bitcoin Widow: Love, Betrayal and the Missing Millions

RELATED VIDEO: How Cryptocurrency ACTUALLY works.

He is responsible for the English speaking market of Youmatter since Is bitcoin bad for the environment? Unlike most forms of currency issued by single entities usually central banks , Bitcoin is based on a decentralized network. Its transactions are approved by different miners who simultaneously solve complex equations using specific hardware and plenty of energy. But how impactful is Bitcoin, really? Perfect to shed some light on how Bitcoin works for those reading about it for the first time.

Are Cryptocurrencies Harming the Environment?

A popular question has sprouted up among hardline cryptocurrency advocates and mainstream investors alike: how can the government regulate Bitcoin and its alternatives? To explore this question we first must understand that Bitcoin and most other ICO issued tokens are in fact decentralized. What does this mean? In essence, the supply of cryptocurrency tokens is not set by a central authority or government. It also relates to cryptocurrencies as a medium of exchange.

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