Why are there so many cryptocurrencies with insanely high inflation (not covered by staking) – is high inflation not straight up ‘stealing’ from the investors?
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We always praise Bitcoin because there’s only 21 million of them and inflation is (temporarily) rather low. We also argue that Bitcoin is better than FIAT for those reasons, while FIAT's money printer goes brrrrrr. Yet there's also so damn many cryptocurrencies with high inflation. Some of the projects with inflation allow users to stake their crypto and then the benefits of staking outweigh the costs of inflation. An example of such a project is Polkadot, where the staking rewards are better than inflation. But some other projects really have INSANE inflation not covered by staking rewards, which boils down to insane selling pressure. Example – Filecoin, insane yearly inflation Some coins have INSANE inflation every year. For instance, Filecoin (#31 market cap) has a yearly inflation of around 100%, while the staking rewards are around 10% and on many exchanges even lower. No surprise that Filecoin did a -99% in 89 weeks given all this sell pressure. March 21, 2021, Filecoin had a $4.8 billion market cap and it was $81. Today, Filecoin has a $1.9 billion market cap and it is $4.43. So the market cap now is 40% of what it was on March 21, 2021, while the price is 5% of what it was. Many other projects have a lot of inflation at the start that to decrease later, like Algorand. Algorand had a LOT of inflation at the start that is slowly decreasing over time. In 2021, the supply increased by 533%! While staking costs were nowhere near that. So there was constant selling pressure. Only now, staking is starting to catch up with all the inflation and the Algo Foundation promised the total supply would not go above 10 billion. A friendly tip: You can actually see the token unlocks on the tokenunlocks website, which is in beta. The price usually pumps going into big unlocks and then dumps hard afterwards. Some big projects have unlocks coming up soon. TLDR: Inflation bad and is it not basically stealing? I know that you are saying, people should know this when they invest in the project, but something tells me that a lot of people do not pay enough attention to tokenomics… submitted by /u/Beyonderr |
