How to find the best coins in a bear market - Inflation rate and impact on the value

By Bfab | Good vibes | 18 Jan 2022

In a bull market, nobody cares about the inflation rate of the coins since they are almost all growing.

But in a bear market, the objective is to buy the dips in order to accumulate more cryptos which will take value in the longer term. Therefore, you need to ensure that the value of the coins you are accumulating will increase.

Why the inflation rate matters

As you may remember, Bitcoin was created after the subprime crisis as a tool to fight against the centralized financial system, but also to create a store of value based on a limited supply of 21 million units. The concept has perfectly worked: since its creation, the Bitcoin value has dramatically increased, whereas always larger quantities of USD and other fiat currencies have been produced, leading to a high inflation rate, especially in this Covid-19 period where the US yearly inflation has reached 7%. Therefore, buying cryptos makes sense since it protects against this inflation. However, you need to ensure that the cryptos that you are buying do not suffer from the same inflation as USD, right? Otherwise, buying these coins do not make sense for long term.

Inflation rates of the main coins

Calculating the inflation rate for cryptos is a bit challenging. The same coin can be inflationary one day, and deflationary the next one. Fortunately, there are some websites such as messari.io providing these data. Let's have a look at the inflation rates of a few coins as of Jan. 18 on the screenshot below.

We can notice that among the top 10 coins (excluding stablecoins):

5 coins have an inflation rate below 3%: BTC, ETH, BNB, ADA and LUNA
SOL and DOT have an inflation rate close to 10%
AVAX has the highest inflation rate, nearly 33%

We can also notice that only 36% of the AVAX total supply has been issued, which means that the inflation rate will remain high for a while.

Therefore, for the long term, it could be worthwhile to bet on low inflation rate coins such as BTC, ETH, BNB, ADA or LUNA. In the short term, the inflationary coins such as AVAX and SOL will likely pump again since they are associated to layer-1 blockchains like Avalanche and Solana which offer attractive DeFi yields. However, this advantage might be jeopardized by other layer-1/2 blockchains For more info on DeFi strategies, please click here.

Below a few referral links to help you earn more cryptos...