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Hello friends, I believe we are all fine. In this publication, I unriddled the responsiveness of our respective economies given their Investment in cryptocurrency in general.
I trust that the majority of us are in trend with the term and purport of investment but then, we have it to be a means of laying out one's resources in order to make some profit. In the social sciences to be precise, this is known to be the using up of an already made capital. Either way, investment is geared towards making profit.
Given the underscored subject matter above, it is clear that Elsavador was the first country to officially adopt the use of cryptocurrency within its jurisdiction on the 7th of September 2021 and since then, the crypto invention has thrived in their country till date.
The adoption of cryptocurrency although maintains some good effects which I'll be streamlining below, it is also good to note that it impounds some bad sides in an economy since no invention is not absolutely perfect on its own.
On the other hand, the said invention has been met with belligerent demeanor from different nations of the world who saw the Investment strategy as a threat to their economy without a careful perusal into the colossus of benefits derivable from it.
Hence, most countries saw it as a measure that would probably stimulate an increase in productivity within their domestic economies while some others saw it as a measure that would lead to deflation given to the enormous benefits associated with its returns but then, let's observe the possibility of these issues in the two major trends of an economy (Inflationary and deflationary trend)
In this regard, I will be taking a generalized deduction on the impact of investing in cryptocurrency in a deflationary trend in an economy.
Here comes the question on economic deflation having learnt the meaning of Investment from the above paragraph. Nonetheless, deflation is an economic scenario where the prices of goods are intensively at a very minimal level. Contrarily, we can simply summarize that deflation is just plenty of goods after a few quantities of money in circulation.
During this economic situation, further Investment into cryptocurrency will lead the domestic economy to an intense degree of deflation given to the fact that a reasonable volume of the domestic currency has been contracted from the economy leaving them to be more vulnerable to certain externalities like unfavorable balance of payment with the outside world and deficit budgeting within their economy. This in response serves as a disadvantage to investing into cryptocurrency during economic deflation.
Consequently, withdrawal of already invested funds from cryptocurrency will help an economy to return back to equilibrium or normalcy during periods of deflation. When the invested crypto funds are withdrawn back to the domestic economy, it will help in absorbing the flooded goods within their domestic economy. This also acts as an advantage to investing into cryptocurrency as it avails the domestic economy the opportunity of bringing their economy to normalcy given to deflationary disequilibrium.
For instance, report made available by CNBC on 24th of August showed that China is battling with a deflation rate of 0.3% and this was as a result of overproduction nonetheless, withdrawal from crypto Investment could be used in buying back these overproduced goods and probably distributing it to the masses hence, this will bring their local economy to the state of equilibrium again. Hence, further proceeds from their crypto Investment can be used in financing a more capital project within their domestic economy.
Finally, we could observe through the elucidation above, how cryptocurrency Investment would affect a domestic economy during a deflationary disequilibrium given to the domestic economy's Investment into the maintained protocol.
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At this point, we'll be considering the impact of investing into cryptocurrency on a more general annotation in an economy that is affected by Inflation.
Inflation as most of us know is a continuous rise or increase in the general price of goods probably within an economy. In a simpler observation, it is also known to be plenty of money pursuing a few commodities.
A further Investment into the invention of cryptocurrency during the periods of economic Inflation will lead to a state of stability within the local economy since the plenty of money in circulation has been contracted through Investment in cryptocurrency. This exposition stands as an advantage in investing into cryptocurrency during periods of economic Inflation.
Consequently, if a country should withdraw their Investment positions in cryptocurrency during periods of inflation, it will further intensify the degree of the inflation prevalent in such an economy given the fact that there is an already high volume of money in circulation within their domestic economy. Hence, crypto investment withdrawal by citizens or probably the government of a particular economy during periods of inflation will rather intensify their economy's rate of inflation than subsiding its effect.
For instance, Venezuela has the highest rate of global inflation and this according to a report by trading economics indicated that the country has an inflation rate of 398.20% as of July 2023. Assuming there is more injection into crypto Investments, it will help in contracting the high volume of money in circulation within their domestic economy and finally bring their country to a state of equilibrium.
We have to come to the fact that the two phases of economic disequilibrium (inflation and deflation) have its impact on every economy and hence should be treated using proper cryptocurrency Investment measures against further deterioration of either of the issues prevalent at the moment.
It is better to make a crypto investment withdrawal during periods of deflation to necessitate the buying back of the over produced commodities in an economy. Contrarily, it is also economic wise to make crypto injection at phases of economic Inflation.
Finally, neglecting the above parameters would lead to further economic disequilibrium in our respective economies and properly considering its measures will guide different economies on what to do at each time while investing in cryptocurrency. Thanks for going through bye.
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