Inflation may have slowed in the US, but elsewhere it’s a different story. In fact, both France’s and Spain’s inflation rates have risen to levels not seen in nearly four decades. Official figures are worrying.
Crypto adoption in both countries has been increasing. But will the coming economic strains have negative consequences for the crypto industry?
Spain and France’s tale
Spain’s annual inflation rate reached 10.8% in July, slightly above market expectations of 10.6%. Official data shows that the figure is the highest since 1984. The Bank of Spain found in a recent report that inflation is one of the biggest problems plaguing the country. A wave of institutional instability that triggers, as a result, cannot be undermined.
However, inflation could potentially drive crypto adoption in the Iberian nation. Although Spain’s adoption level is far behind the other developed and developing economies, the popularity of the asset class in the country has followed an upward trajectory.
As previously reported, the National Securities Market Commission (CNMV) has estimated that almost 7% of Spain’s adults have invested in crypto. The Spanish regulator surveyed 1,500 adults in the country to find out what proportion of them have allocated some of their funds to the digital asset market. Individuals belonging to this group are interestingly young, educated and well paid individuals.
The rise can also be attributed to regulatory clarity in the space. Spanish authorities consider digital assets a legal form of investment. At the same time, capital gains from the sale of these tokens are taxed in a range of 19% to 23%
France also has a similar story, with the inflation rate at 6.1% in July. The last time the numbers were this high was back in 1985. Many experts believe that inflation has been going on for the better part of a decade and that the pandemic only accelerated it.
European crisis and Bitcoin
There is growing uncertainty about whether Bitcoin and crypto can actually prove to be an effective hedge against rising prices. However, amid the intense volatility of the past couple of months, a weakening euro and strengthening dollar has the potential to cause very real problems for Europeans.
Bitcoin and crypto could be a way out of the looming gas shortages, high energy prices and an impending recession brought about by the current financial system. However, the persistent energy crisis in Europe threatens a prolonged bear market.
Things could get worse if Russia imposes potential gas cuts, which could push certain Russian energy-dependent countries in the region into deep economic crises.
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