Euro in difficulty, cryptocurrencies to the rescue

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With inflation peaking in the Eurozone, Bitcoin and other cryptocurrencies are emerging as the best alternative to fiat currencies.

Interest rates on the rise in the Eurozone

On Thursday, the Board of Governors of the European Central Bank (ECB) announced plans to raise interest rates in the eurozone by 0.5%. For the first time since 2011. To justify this decision, the organization reaffirmed its willingness to bring inflation back to the 2% target in the medium term.

From July 27, interest rates on the main refinancing operations, margin line and deposit facility will be increased to 0.50%, 0.75% and 0.00% respectively.

For the ECB, this is an opportunity to review its monetary policy. To this end, the ECB has introduced a new carryover protection tool that will ensure a gradual and efficient rollover of this new strategy. Furthermore, the Commission stated that tariff standardization would be further developed in the forthcoming consultations.

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Rampant inflation is comparable to cryptocurrency

According to Eurostat, the statistical office of the European Union (EU), there is a real cause for concern. In the euro area, the annual inflation rate was 8.6% in June 2022, up from 8.1% in May. A year ago it was around 1.9%. As for the European Union, in June 2022 it stood at 9.6%, compared to 8.8% the previous month. A year earlier, it was 2.2%.

Cryptocurrencies, on the other hand, are very resistant to inflation. In fact, digital assets like bitcoin are the safe haven of choice for fiat currency devaluations. In doing so, they rely on certain principles, such as: deficits, a gradual reduction in supply and the government’s failure to comply with measures such as adjusting interest rates or an improper increase in the money supply.

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Furthermore, while cryptocurrency volatility often results in annual price declines, they remain well below the losses caused by the aforementioned rates.

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