FX.co ★ BITCOIN. Inflation could be the main driver for bitcoin in 2021

Last year, when the whole world confronted the "coronavirus" with huge economic and human losses, bitcoin showed its almost strongest growth in the entire history of its existence. Someone may see a paradox in this, but in fact, everything is easy and simple to explain. Note that fundamental or technical factors alone do not move the price. Demand and supply move the price. Thus, if the bitcoin rate (like any other asset) rises, this means that the demand for it increases or the supply in the market decreases. What global changes in the economy have occurred in the past year? In addition to the record drop in the second quarter of 2020, there was only pumping of its money, which was often scattered altogether from a helicopter (as in the United States). In other words, what has happened is that governments and central banks have been feeding the economy with money to stimulate it; as a result, the money supply in many countries has swelled, and production and the service sector have shrunk during the pandemic; thus, there is more money and fewer goods and services produced; the natural result of this process will be an increase in inflation.

The fact that inflation has been at a low level over the past year only suggests that all the money introduced into the economy was immediately withdrawn by the beneficiaries. That is, for example, the US government gave out 0.5 trillion dollars to all the people of America, and there is nowhere to spend money during the crisis. Yes, low-income and poor families spent it on basic necessities and food, but most Americans did not desperately need $1,000 from Donald Trump and $1,400 from Joe Biden. And we are only talking about direct payments to the population. This money just settled "under the pillows". Therefore, inflation remained low during this period of time. But now, when the US government and the Federal Reserve continue the policy of trillions of injections into the economy, and the economy itself is recovering, all the money introduced will slowly surface. In March, inflation has already jumped to 2.6%. Most likely, it will continue to grow in 2021. And what is inflation? This is a decrease in the purchasing power of money over time. To protect themselves from the depreciation of money, investors start looking for higher-yielding assets than standard stocks and bonds. And they all came to the cryptocurrency market in 2020-2021.

Bitcoin has become a tool that can protect against inflation. And since inflation began to accelerate in the United States, it is bitcoin and its "siblings" that can continue to serve as protection against the depreciation of money around the world (the problem of rising inflation is not only in the United States). Of course, this is just a hypothesis. Large investors may start leaving the market at some point. For example, when the crisis is over. However, no one knows the future. Hardly anyone could have guessed that a pandemic would begin in 2019. Thus, as long as the upward trend persists, of course, one should remain in buying bitcoin. We now have an upward channel at our disposal that will show when the upward trend is completed. From our point of view, the main opponent of the further growth of the bitcoin is now its own value. It really has risen in price quite strongly, and fewer investors are willing to buy it at the current price.