Trading Activity Surge to A 9-Month High in Russia; The Correlation Between High Inflation and Increased Bitcoin Demand

Cryptocurrency has gained a lot of traction in this age of economic uncertainty. Before the Russian annexation of Ukraine, Bitcoin was trading as an alternative asset resulting positive correlation with equities. In the last few months, Bitcoin has accomplished more than 13%, and inflationary pleasure has caused a booming surge in demand. In economies that are currently witnessing runaway inflation like Russia, the adoption of cryptocurrency has vastly increased.

A Surge in Bitcoin Demand

Economies are experiencing record levels of enhanced inflation influenced by several factors. The Russian annexation of Ukraine and the quantitative easing programs that have been operating since the start of the COVID19 pandemic are the main causes. Russia’s invasion and the corresponding western sanctions have led to shocks in the oil market. As a result, crude oil has assembled more than 23% apprehensions of supply-side pressure.

The fiscal market investors are notoriously known for reacting to oil rates and central bank policies; Hence, estimated to react to this surge. For instance, they could respond by evading their positions within safe-haven assets like Bitcoin or purchasing equities profiting from the oil rally.

Russia’s raid in Ukraine led the Russian Ruble to a 30% plunge against the greenback dollar. More, with inflation reported at 9.5%, Russia’s central bank trekked the key lending rate from 9.5% to 20% to switch the runaway inflation. As a result, Bitcoin trading activity surged to a 9-month high in Russia.

Analysts estimate higher oil rates will facilitate a hike in product rates resulting in higher inflation internationally. Despite major central banks’ initiatives to manage quantitative easing programs and increase interest rates, cash savings have already been affected by the surging rate of inflation. Savers now seek alternative mediums of loading their wealth.

Since early 2022, gold performance has been winning the inflation windbreak war against Bitcoin. However, due to the harsh western sanctions restricting transactions with Russia, the retail industry is finding it easier to utilize Bitcoin as compared to gold.

Bitcoin is deemed to be a dependable store of wealth over the past decade despite its evident volatility. As inflation rises, more and more people look to protect their wealth in some way. Bitcoin, as a decentralized form of currency, is unaffected by nations’ financial woes, making it an attractive investment opportunity for those looking to hedge their bets. However, Bitcoins utilization as an inflation windbreaker is yet to progress as its instability corrodes value consistency.

Ultimately, Bitcoin has so far shown itself to be a resilient phenomenon in the world of crypto and is likely to continue growing as inflation increases. It remains to be seen for how long it can continue to do so and how long it will remain out of the reach of governments. Yet, if history has anything to say about it, it’s that the demand for cryptocurrency in countries with high inflation tends to increase throughout the relevant period.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.