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Deflation is coming
2 min read
Inflation has peaked but the story does not end here.
Deflation is coming.
If you do not know what deflation is, the ChatGPT can tell you that:
Deflation is a sustained decrease in the general price level of goods and services. It occurs when the inflation rate falls below 0%. This can happen when there is a decrease in aggregate demand, an increase in the supply of money, or a decrease in the supply of credit. During deflation, the purchasing power of money increases, and consumers are able to buy more goods and services for the same amount of money. Deflation can also lead to an increase in the real value of debt and can make it more difficult for businesses to make a profit, which can lead to a decrease in economic activity.
Since we had a terrible monetary policy in the last decade, assets value have soared, but many have been left out of the great growth period.
Now, the economy has been slower and harder to produce any meaningful growth. Will crypto make a comeback?
Probably but it is harder for crypto to make up the gain if they continue doing what they had been doing.
In the deflation stage, assets will devaluate due to the increasing value of debts. There are less spaces for risky bets like crypto that people will pour their money into and wait for another decade to come back.
Everything will be costly and you cannot depend on crypto to gain sudden but unsustainable to make profits.
Thus, crypto will perform even worse in the deflationary environment.
Of course, you can bet me wrong but it will be harder for crypto to recover since 2021.
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