How did these Altcoins succeed due to high inflation?

The cryptocurrency market, known for its volatility, faces a new challenge: high inflation.

This phenomenon is particularly prominent in many proof-of-stake (PoS) altcoins, raising concerns about the long-term viability and value of these digital assets.

Altcoins at high inflation rates

Swi, with a staggering inflation rate of 36.85% and a high market value of $10.54 billion, is an example of the seriousness of this situation. Although the reward rate is modest at 4.56%, it threatens the stability of the coin's price.

Similarly, Evmos, which has a huge market cap of $25.82 million, faces challenges with an inflation rate of 24.19 percent. Since the award rate is so large at 34.13%, the implications of such inflation cannot be ignored.

Sentinel, Ume and Comex, though smaller in market capitalization, are facing over 20 percent inflation. Undoubtedly, the figures paint a picture of a market segment under stress, where the potential devastation of these digital currencies overshadows the traditional sense of high-value rewards.

Read more: Staking Crypto: How to Stake Coins and Grow Your Income

Here is a list of altcoins with the highest inflation:

How Inflation Can Affect Cryptocurrencies

Inflation in the context of cryptocurrency is similar to traditional economic inflation. Essentially, an increase in an altcoin's circulating supply can decrease its individual value, assuming demand is inelastic. This inflation represents a reduction in value for investors and owners of these altcoins. As more tokens enter circulation, the total supply held by each investor will decrease, unless they participate in ongoing staking.

Additionally, the temptation to sell high premiums for quick profits increases selling pressure in the market, which can drive down prices. While high-yield rewards may initially attract investors to a viable product, the sustainability of such a strategy is questionable. Thus, excessive inflation can undermine investor confidence, leading to a reduction in demand and, consequently, a fall in prices.

For example, due to high inflation, the price of Axie Infinity's Smooth Love Potion (SLP) is still at an all-time high of 98 percent. Despite the overall rally of the crypto market since the last quarter of 2023, the token failed to recover significantly.

“SLP was a terrible P2E game because it was so inflated,” said a crypto researcher under the pseudonym Astro.

The impact of inflation also affects network security assurance systems. Indeed, higher rewards may encourage more stakeholders to participate in network authentication, which increases security. However, excessively high inflation may discourage long-term ownership, which may reduce active participation in network authentication.

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The issue of inflation is particularly critical in the cryptocurrency market due to its potential for centralization. Because if inflation benefits a disproportionately large number of stakeholders, the decentralized ethos of these digital currencies is at risk, power can be concentrated in the hands of a few.

High inflation may not be an immediate death sentence for altcoins such as Sui, Evemos, Sentinel, Umi, and Comex, but they do pose significant challenges.