Choose Your Balloon – Fiat Inflationary, Crypto Deflationary
- By FXT
- March 15, 2023
- FXT Analysis
Fiat currency (think USD, AUD, EUR) is an inflationary asset that devalues or can be altered by a group of people based on their policy decisions like printing money and changing cash rates.
Crypto on the other hand, is deflationary, meaning there’s less of it over time (burned coins) and there’s no puppetry going on in the ivory towers that the people can’t see.
As with anything, there are opportunities and issues with both so let’s take a deeper dive.
Holding crypto retains risks such as hackers, an unregulated environment, broker instability and its lack of uptake in the general world like buying groceries or coffee. But it’s deflationary nature and scope of cutting out the middle men (banks, politicians and more) holds great power if the issues are resolved.
Fiat currency right now is being devalued like no tomorrow as countries race to the bottom. That means dollar for dollar, each dollar is worth less than it was 5 years ago. On the flip side, it is regulated and considered a safer option by the populous as well as being accepted as legal tender to purchase things you need.
Trading FIAT Currency
The great part of trading fiat currency is that if you can predetermine what politicians and central banks are likely to do, you may have better decisions in your trades and be able to pre-empt future outcomes. Additionally, as fiat currency is traded in pairs, you can pit strength against weakness to take advantage of an ‘unfair battle’ in the Colosseum of financial markets.
Crypto on the other hand has been considered unpredictable at times and due to the hidden and decentralized nature of the assets, there is less ability to drive trading outcomes from predictors and understanding people’s (politicians and central banks) drivers. The crypto market does have one thing going for it though, the massive rallies it sees are incredible and have made many HODLers very wealthy over the past decade. Add to that, the ability to leverage in on a bull run creates something unprecedented in financial market history.
Silicon Valley Bank Collapse
Bitcoin, Ethereum, Ripple (XRP) are all in the running to establish ground should the fall of the Silicon Valley Bank ignite further collapse. As businesses struggle, stock markets grind to a halt and traditional investors fear inflation eating away at their nest egg, crypto holders relish the opportunity to hold on for dear life as the token population is burnt and inherently increases the value of their holding over time.
It’s time to choose your balloon, inflation isn’t always what you want.