Bank of America sees inflation pick up and investors take refuge in bitcoin

Key facts:

Many companies plan to raise prices due to higher costs, the BoFa warns.

Unlike what happens in the fiduciary system, you cannot create debt with bitcoin.

In its most recent report on the earnings obtained in the first quarter of 2021, the Bank of America (BoFA) alerted investors and companies to take measures to counteract the inflation that has been registered during this period, and that is expected to increase in the next few months.

In its report, the bank noted that among the main elements that are driving inflation are raw materials, transportation and labor. A conclusion similar to the one reached by Trafing Economics, according to which global inflation is reflected in the increase in the value of raw materials. In such circumstances, companies are evaluating the possibility of increasing the prices of goods and services, according to the Bank of America.

The financial institution, based in the United States, added that in this scenario, investors may want to “buckle up,” while many companies plan to raise prices due to higher input costs.

“The most lasting true inflation usually comes from wages,” added Fernández. Meanwhile, corporate earnings in general have been meeting or exceeding expectations in the first quarter, the executive added.

With bitcoin, no person has access to the money of an individual without their consent. Source: elements.envato.com.

Inflation is a phenomenon that is observed in the economy of a country and is defined as a generalized and sustained increase in the prices of goods and services in that nation. When the general price level rises, fewer goods and services are purchased with each unit of currency.

In countries whose economies are affected by inflation, a large part of the population assumes they should turn to the dollar as a hedge to protect against the devaluation of the local currency.

These people who see their purchasing power diminished keep funds in dollars and not in their local currencies, because these devalue against the United States currency, for this reason the dollar is considered a haven of value.

A safe haven is an asset or investment that is expected to retain or increase in value during times of market turmoil. Investors seek safe havens to limit their exposure to risk and losses in times of uncertainty and strongly bearish markets.

The potential of bitcoin as a haven of value

Regarding the potential of bitcoin as a refuge of value, a study by Coin Metrics, published in CriptoNoticias, highlights how, since the end of 2020, the position of investors has been changing. There he assures that the predictability and transparency of Bitcoin’s monetary policy give it a good potential of refuge from inflationary environments.

In the study, Coin Metrics begins by referring to the initial stance of institutional investors against bitcoin, which was classified as a risky and speculative asset. However, this perception has changed, says Coin Metrics, especially in this year 2020, in which many institutions have started supporting bitcoin.

Although there is no official list, as of today they are considered safe haven assets. precious like gold and currencies like the dollar. It is important to understand that the investments considered as such can vary as market conditions change.

In this case, bitcoin can also be considered as a safe haven asset against inflation that hits the purchasing power of the population with limited economic resources.

The most popular cryptocurrency has been designed for strict control of its issuance. Not only the maximum limit of bitcoins issued is capped of 21 million, but every four years the rate of issuance is reduced by half. Thus, inflation in Bitcoin decreases programmatically.

Another advantage of bitcoin is that no person has access to the money of an individual without their consent. Thus reducing the risk of theft.

Nor does it belong to any state or government and it can be used worldwide, regardless of geographic and political barriers. Foreign to the fiduciary system: you cannot create debt with it, its value does not depend on an intervention of a central bank.

Works 24 hours a day: for bitcoin operations there are no schedules or holidays. At the time of writing this note, its price is USD 54,822 and has increased in the last 24 hours by 2.21%.