IPC: Why is your money becoming less and less valuable?

Question

## Core PointsLooking at the money in the account, the numbers haven&#39;t changed, but the things that can be purchased are fewer and fewer—this is the true portrayal of **inflation**. The core tool to measure it is the **Consumer Price Index (CPI)**.The IPC is essentially a thermometer that monitors changes in the cost of living, directly affecting your wallet, business decisions, and even the fluctuations in the cryptocurrency market.## What is IPC actually measuring?In simple terms, the IPC records the average price increase of daily consumer goods and services. This includes things like dining, buying clothes, rent, medical expenses, and entertainment; anything that can be purchased with money counts.The national statistics department does the same thing every month: collecting price data from supermarkets, gas stations, hospitals, etc., and then comparing the price changes with the previous month and the same period last year.## How is it calculated?1. **Selection of the Basket of Goods**: The government selects a basket of representative goods and services.2. **Runner Pricing**: Regularly collect prices from various shops, online stores, and service providers.3. **Allocate Weight**: What proportion does each aspect of life occupy (for example, rent may account for 30%, food for 20%)4. **Calculate Index**: If a certain benchmark month is set to 100, and now it is 105, it indicates an increase of 5%.## What does IPC affect?**Your spending**: Price increase → Not enough money to spend → Buy less stuff**Interest Rate Policy**: The central bank sets interest rates based on the IPC. When inflation is high, the central bank raises interest rates to cool the economy; when inflation is low, the central bank lowers interest rates to stimulate growth.**Your salary**: Companies may give employees a raise based on the IPC (or not 🤷)**Government subsidies**: Pensions, welfare, etc. will be adjusted according to the IPC.## Why does IPC have an impact on the cryptocurrency market?**Inflation Hedge**: When the CPI soars, indicating the devaluation of fiat currency, more and more people are treating Bitcoin and mainstream coins as "digital gold" to protect their assets.**Market Sentiment Reversal**: IPC data → Central bank interest rate hike? → Traditional investment products become more attractive → Funds flow out of risk assets (including cryptocurrencies) → Cryptocurrency prices come under pressure**Long-term Narrative**: Sustained high inflation may shake people&#39;s confidence in fiat currency, increasing the adoption of cryptocurrencies.## Plain SummaryIPC is a signal light for economic health. It affects your purchasing power, the financing costs for businesses, and the decisions of central banks. Ultimately, these factors will impact the stock market, the bond market, and even the cryptocurrency market.To understand why the cryptocurrency market is falling, first look at the latest IPC data—many times the answer is right there.