Bitcoin, inflation and the global interest rate chaos: can BTC help?
For a long time, the following credo has applied in our financial world: Interest on fixed-income investment products is significantly higher than the interest on traditional savings accounts or call money accounts. In today’s environment, which consists of inflation and low interest rates, investors hardly see the classic investment at the bank as attractive anymore. On the contrary: investors take refuge in products with a higher return. What role does Bitcoin play in this?
Bitcoin in times of zero interest rate policy
In the 2000s, savers still received interest on their fixed deposit accounts of 3-5% per year. The return on a fixed-term deposit account was thus well above the rates for a call money account and also exceeded inflation. Under these conditions, a fixed deposit account was an attractive and secure investment option for investors.
Today’s situation looks different, however: the current zero interest rate policy means that savers receive interest rates between 0 and 1% per year on the current, overnight and fixed deposit accounts. The dilemma behind this is inflation, which is above this rate. In other words, investors are effectively losing purchasing power.
The world-famous author of the book Rich Dad, Poor Dad formulated this particularly striking. Robert Kiyosaki said in an interview with Stansberry Research in September this year:
If everything were perfect, we wouldn’t need money, silver or Bitcoin Union. However, the zero interest rate policy shows us that banks don’t really need our savings and capital.
Kiyosaki even said the opposite is the case. Investors are punished with negative and penalty interest for keeping money in the bank or account. Therefore, alternative investments are needed.
Interest rate policy is forcing investors on the bonds, stock and real estate markets. It also forces investors into new markets with attractive returns, such as cryptocurrencies and Bitcoin.
From a personal point of view, Kiyosaki made a few valid points. But how attractive are bonds and real estate today and are they suitable for everyone?
Bonds and real estate are not for everyone
The following statement can definitely be made here: Bonds were considered a safe addition to the portfolio for many years. Bonds from countries with a high credit rating gave investors a safe dividend and thus a good opportunity for diversification.
But from today’s perspective – and this is where the zero interest rate policy is taking effect again – the weaknesses of bonds have been maximized and their strengths minimized. This means that bonds from countries with an acceptable credit rating are also significantly below inflation and are hardly attractive, especially for private investors.
For many, real estate is still considered one of the most stable tangible assets. But especially in the course of Covid-19 and the associated effects, there are also dangers here. If there are long-term consequences such as mass layoffs and economic downturns, it will be difficult for many borrowers to repay their home payments.
The consequence could be a widespread loan default that corrects real estate prices.
Bitcoin is a growth market
Now we come to Bitcoin (BTC) . Of course, cryptocurrency is not the solution to all problems. Nevertheless, we can state without a doubt that the properties of the decentralized cryptocurrency are one of the greatest strengths in the current times, especially with regard to the specified range.
I recently reported on the Global Cryptoasset Benchmarking Study . It shows that the global user base of Bitcoin has increased by 189% in the last two years alone.
More and more people are using Bitcoin as an investment and security for their own portfolio. The events are increasing and so it became clear this year that not only private investors, but also more and more institutional investors as well as companies traded on the stock exchange are investing in the crypto currency.
A current example of this is Square, run by Twitter CEO Jack Dorsey. One credo is becoming increasingly clear.