TL; DR
Full story
There’s a theory that Bitcoin’s latest price surge could be contributing to US inflation…
All thanks to this hip phenomenon called the “wealth effect.”
The general basis is relatively simple:
People make more money → they spend more money → the demand for goods remains high → so companies keep their prices high.
In such a case, if people make it more and expenses more (instead of making fewerand expenses more) – the Federal Reserve could view the economy as healthy and do nothing to curb rising prices.
This is where Bitcoin comes into the picture:
Bitcoin (and crypto in general) has done super well and super fast this year – and a lot of regular people own crypto (like our neighbor Dave).
The problem is: the Daves of the world essentially feel like they’re making money out of thin air, allowing them to buy things they weren’t able to before.
(Think: houses, luxury goods, or even just more shopping…)
They are fooling themselves (and the wider economy) to think that prices are at a healthy point.
…when this new wealth was actually found, and the expenses that went with it, is not sustainable.
(Crypto bull runs only happen once every four years).
Will this actually happen and have enough of an effect for everyone to feel it?
No idea – we are not economists.
But we’re painful optimists, so for now we’ll guess ‘no’.
