I’ve noticed that many people in the crypto community don’t really understand purchasing power parity, which is a basic concept for understanding why cryptocurrencies are valued differently in different countries.

Here’s the gist. When you see that the same product costs differently in the US and India, it’s not just random. This is driven by a concept that economists call purchasing power parity. Essentially, it’s a comparison of how much you can actually buy with the same amount of money in different places.

Take a Big Mac—remember how its price differs across countries? That’s a classic example. In the US, it might cost $5, while in India it’s only $3. This doesn’t mean India is cheaper in everything; it shows the real purchasing power of currencies. Purchasing power parity is exactly about that.

When economists look at a country’s GDP, they don’t just use the exchange rate. They adjust prices using purchasing power parity to understand the real standard of living. For example, India can look poorer on paper than it really is if you don’t account for differences in prices. Once you adjust for PPP, the picture changes.

But here’s what’s especially interesting for us crypto people. In countries with a weakened currency, people often look at Bitcoin and other cryptocurrencies as a way to preserve their purchasing power. If your national currency loses value faster than inflation rises, stablecoins become a real lifeline. This is especially clear in countries experiencing hyperinflation.

In practice, purchasing power parity helps explain why people in different regions engage with crypto differently. For some, it’s just speculation; for others, it’s a survival tool during an economic crisis. The difference lies in the real value of their local currency.

Of course, the theory isn’t perfect. The quality of goods can differ, taxes are different, and not all goods are traded on the international market. Plus, inflation can quickly throw off all calculations. But as a general tool for understanding the global economy, it works.

If you take crypto seriously and want to understand why prices and demand for assets vary from country to country, learn about purchasing power parity. It will help you better predict which regions will be more active in crypto—and why stablecoins grow in places where currencies are unstable.