2022 keeps surprising us with the news that could shake up the peaceful days should we live back in 2019, but this is just the reality we have to deal with now. Sri-Lanka with chaotic protests all over the country, UK Prime Minister Boris Johnson unexpectedly resigned, Russian-Ukraine war and the following up energy crisis only naturally stirred up the world inflation.
Consumer Price Inflation, caused by the recent geopolitical events, is seizing the world as we speak. The main fear of investors is coming true – the US Federal Reserve is fruitlessly trying to “subdue” the coming recession. As a result, we have the lowest return rate for stocks and bonds in the financial market history. 2022 roughly taking away places for investors to accumulate their funds.
It is important to note that CPI data is a delaying indicator. The stock market, on the other hand, is based on a forward-looking approach. Crypto investors assume that increased CPI figures are the radiant signal that the cryptocurrency market may go even deeper into the bear state.
Should the US economics eventually cool down, crypto markets can show an upward movement, so the situation cannot be predicted for sure at the time being.
What Inflation means for the Crypto Market
Crypto market is not as different from the stock market as it is still in trade along with the assets deemed as high-risk. The price of the first crypto on the chart – Bitcoin – sits between $21,000 and $24,000 for the last month, which is three times lower than the last all-time high. Over the last months, we witnessed the most unpleasant events in the industry as investors and companies were forced to sell their assets in the event of market turbulence.
Namely, the chain of unfortunate events started with the Luna crash, revealing Three Arrows Capital as Ponzi schemers. The mass commotion eventually caused the waves of unwanted pressure on other centralized crypto lending platforms – Celsius, BlockFi or Voyager digital.
Another important market group are Bitcoin miners. Their mining rewards shrank significantly since the market situation deteriorated. Skyrocketing energy prices, the low Bitcoin hashprice and exchange rate forced miners all over the world to go out of business and sell their Bitcoins.
A lot of investors gave up on cryptocurrency. Is Bitcoin still worth our trust, even with CPI inflation causing investors all over the globe to panic? This question will be addressed in the next article.
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