Stablecoins as instruments against inflation? With inflation rising worldwide, more people are turning to stablecoins due to the benefits they offer to hedge inflation.
Economies around the world are facing a motley of challenges caused by rising inflation. High inflation devalues national currencies, which, in turn, pushes up the cost of living, especially in scenarios where earnings remain unchanged., prompting the Federal Reserve to implement a series of fiscal countermeasures designed to prevent the economy from overheating. Hiking interest rates was one of them.
Whitney Setiawan, a research analyst at the Bitrue crypto exchange, told Cointelegraph, “With the U.S. dollar recording steep appreciation against other fiat currencies, most crypto-savvy users have a special interest in holding stablecoins.” Collateralized stablecoins are the most popular and are backed by reserves of their underlying assets. In most cases, their value tracks that of popular national currencies such as the U.S. dollar, the British pound or the euro.
Stablecoin transactions are also fast and cost-effective when compared to fund transfers made via commercial bank networks. This makes them convenient for people looking to send and receive money and a hedge against inflation. “Banks have strict monetary policies that generally taper down the dollar’s supply. This trend makes stablecoins an attractive option for those aiming to access the USD’s value, as they are generally accessible with little barrier to entry.”
Because the Venezuelan bolivar is volatile and has a value that fluctuates throughout the day, it is common practice for traders to list merchandise and service prices in U.S. dollars. Customers who don’t have dollars are usually expected to pay using bolivars, but at the prevailing exchange rate relative to the dollar.
The growing popularity of cryptocurrencies in the country has, in the recent past, led to monetary control concerns andHowever, crypto utility is still high despite the prohibition.According to the latest statistics released by the country’s National Bureau of Statistics , the inflation rate in the country reached 19.64% in July — a 17-year high.
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