Rather than being used as a currency, people that enter the cryptocurrency market do so because they live in countries with high inflation. This is the example of Russia, Turkey, Argentina, Venezuela or Zimbabwe, where people have been using Bitcoin on a regular basis amid high inflation rates and currency depreciation.
Mike Novogratz Believes Inflation Helps Bitcoin Adoption
Mike Novogratz, one of the most respected investors in the cryptocurrency market, said during a CNBC interview that Bitcoin might not be a good currency. This is because Bitcoin works better as a store of value and as a way to transact larger sums of money.
Despite that, it is worth taking into consideration that the Lightning Network (LN) is also becoming quite important. Thanks to it, individuals are now able to make payments using Bitcoin and process them instantly and for almost no fee.
Furthermore, he stated that Bitcoin will be working as a store of value rather than as a currency. He has also talked about Ethereum (ETH) and how this virtual currency is now being used to price non-fungible tokens (NFTs) and other assets.
Indeed, Novogratz believes that Bitcoin continues to grow due to the fact that there are countries with high inflation rates and depreciating currencies. About it, he stated during the interview:
“People are opting into the Bitcoin community. There are literally more people that own Bitcoin than live in Russia. It’s the eighth-largest country in the world by participants. They freely opted in and said ‘We believe in this ethos of this community,’ which is a hard money way to store our wealth. And I think that will gain momentum as trust continues to break down.”
At the same time, he talked about how inflationary policies in the United States have also had an impact on people buying Bitcoin. Let’s not forget that countries all over the world decided to print large amounts of money after the Covid-19 crisis. The United States gave checks to families and pushed inflation to over 7% in the last 12 months.
Other countries have taken similar measures. Despite the fact that central banks have tried to push interest rates higher, most interest rates are still below inflation. That means that, in real terms, people are still losing money against inflation, making it more difficult for them to save and think about their future. This is where Bitcoin, with its limited supply and predictable coin creation, has been adopted in many countries around the world.