Stablecoins: A Cure for Inflation? Learn with MEXC Blog

Investors hold stablecoins as a strategy to boost market liquidity for cryptocurrencies and as an inflation hedge. Because of the current economic system, inflation is an issue for the entire world. The ability of central banks to engage in unfettered quantitative easing increases inflation and living expenses. In June 2022, the Consumer Price Index (CPI) for the US reached its highest level of 9.1%. During this time, the CPI increased by the most in 40 years. One of the actions the Federal Reserve must take to calm the market is to increase interest rates. In this article, we'll go into greater detail on the role stablecoins play in inflation.
Consequences of a Higher Interest Rate
A loan, such as a mortgage loan, is more expensive to get for both businesses and individuals when the interest rate is higher. Since the financial crisis of 2008, the average fixed-rate 30-year mortgage has increased to 6.02%, which is the first time above 6%. To further clarify, it is extremely likely that property prices will decline in the near future, and those who purchased a home in the last few years may be negatively impacted.

Along with paying a premium and experiencing higher inflation, countries that import goods and services from the US also suffer from the growth in the value of the US dollar.

Use Cases of Stablecoins in Inflation

Stablecoin, an asset that is frequently used to manage the value stable with algorithm, a particular sort of cryptocurrency. Thanks to blockchain technology, stablecoins have a number of advantages:

• Without the limitations national boundaries. Stablecoins can be sent or received internationally even if you don't have a bank account. Recognize that many people around the world lack the means or eligibility to open a bank account.
• Liquidity. You may quickly convert your stablecoins into US dollars or other currencies.
• Transaction speed. Blockchain technology makes money transfers faster and less expensive than the present banking system.

A Fun Fact  & Conclusion

In 2021, El Salvado, the first country to accept Bitcoin as its second official currency after adopting the US dollar as a result of hyperinflation, did so. By holding stablecoins, you can increase the liquidity of your assets while securing them against inflation and other financial threats. In order to understand more about cryptocurrencies and the industry, we recommend that you visit the MEXC Blog.