Crysis And Crypto - Is Now The Time For Crypto?

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Posted: Aug 12, 2020 9:00 AM
Crysis And Crypto - Is Now The Time For Crypto?

Source: AP Photo/Gillian Flaccus

Although cryptocurrencies have been around for a good decade, they’re still not considered a mainstream investment or trading option. Investors tend to instinctively prefer the traditional investments with which they’re familiar. Additionally, most of them don’t trust cryptocurrencies because they don’t understand the tech which forms its foundation. 

That said, chaotic times can encourage people to accept new ideas and strategies which they’d previously disregarded. We could be seeing the moment when cryptocurrencies join the mainstream.   

The Stock Market Has Gone Insane

The onslaught of COVID-19 has acted as an accelerant on the massive bubble of debt that’s been destabilizing the economy for years. Entire industries have been put into indefinite deep freeze. Sudden widespread unemployment has left consumers without any cash for non-essential purchases, effectively bringing the economy to a hard stop. 

Years of artificially low interest rates discouraged savings and encouraged individuals and businesses alike to rack up their debt burden without a thought to how they’ll pay it off. Even the United States of America itself has a national debt of over $26 trillion. That’s higher than it’s ever been before, higher than America’s annual GDP, and way beyond the debt burden of any other country in the world. 

Meanwhile, central banks like the Fed are making things worse with a policy of aggressive quantitative easing (QE), whereby they print money as quickly as possible, while lowering rates even further or holding them in an impossibly low position. 

Against this backdrop, with the economy stalled, a population stripped of assets, millions out of work, and even giants like JC Penney, Hertz car rental, and Diamond Offshore Drilling having filed for bankruptcy, the stock market is inexplicably soaring. 


(Image source: https://markets.businessinsider.com/index/dow_jones)

To leading investors, this is a clear sign of an unstable, volatile market that will burst sooner or later. 

It’s a terrible time to invest in stocks and shares, but those who are fortunate enough to still have some savings need a safe place to keep their cash. Low interest rates give you nothing for the cash you store in bank and brokerage accounts. If, as is widely expected, interest rates dip below 0%, you’ll be paying your bank for the privilege of holding your money. 

Even worse, when the bubble bursts, banks will start to fail.

It’s not even wise to keep your money in a sack under the mattress. With QE pushing inflation so fast, your dollars and cents might not be worth anything by the time you really need them. It’s time for a new approach.

Cryptocurrencies Are Shining with a New Luster 

Markets and banks may be losing popularity faster than you can blink, but cryptocurrencies are winning. Unlike today’s fiat currencies, which lost their “hard currency” status with the final abandonment of the gold standard in 1971, cryptocurrencies are called “digital gold,” because they are unaffected by inflation. 

The recent Bitcoin halving is a timely reminder that crypto has deflationary tools built-in to the system. We’ve recently seen Bitcoin stop correlating to stock markets and instead imitate gold by rising when stock markets are down, making it effective as a hedge against the markets.

Grayscale Investment fund is currently buying up Bitcoin and Ethereum at a rate which will see it own 3.4% of the world’s Bitcoin by January 2021, a testament to the new trust which mainstream investors are beginning to feel in crypto. Grayscale bought $184 million or 19.879 BTC in one week in June, and $110 million of Ethereum in the first six months of 2020. 

Billionaire investor Paul Tudor Jones is also buying Bitcoin as a hedge against crazy inflation, as central banks everywhere print money as fast as possible, saying, “I am not a hard-money nor a crypto nut. The most compelling argument for owning Bitcoin is the coming digitization of currency everywhere, accelerated by Covid-19.”

Helping crypto along in its new popularity is a range of tools making it smoother and easier for investors to get started. Skrill is an intuitive global platform allowing you to buy and sell more than 8 cryptocurrencies. Its ease of use, combined with the fact that its parent company, PaySafe, is regulated by the FCA, helps investors feel secure buying and selling cryptocurrencies. The simplicity of opening an account, depositing funds, and making a direct purchase from fiat currencies into crypto makes investing in Bitcoin as smooth as investing in the S&P. 

The Wirex card operates like a classic credit card, but includes crypto currencies as well as fiat currencies. It’s made people more familiar with crypto as an actual currency – more comfortable using it for transactions and more willing to trust it as an investment. Robinhood Crypto, an exchange trading in both traditional stocks and Bitcoin and Ethereum, similarly helps to blur the lines between stock market and crypto investing.

Physical Gold Is Still a Safe Option

Alongside the spike in popularity for crypto, physical gold is still retaining its appeal as a safe investment. 

Historically, gold is a safe hedge in times of economic turbulence. Gold has surpassed the all-time high of $1,912 that it hit in 2011, and analysts at the Bank of America expect it to go even higher, potentially reaching a peak of $3,000 within 18 months due to QE from central banks. Paper gold, or ETFs that are based on gold, are also rising. 

Gold prices have experienced some short-term drops, generally whenever the market shows signs of stabilizing or the USD rallies. If market liquidity dries up, there’s a chance that gold could be released in larger amounts, bringing down the price, but that’s not expected. London analyst Robin Griffiths said, "For the long-term gold is very strong. Next serious overhead resistance is the old all-time high of $1900. Once it breaks that, gold's going to go a lot higher."

Crippled Economy Means a Moment for Cryptocurrencies

With stock markets decoupled from reality as the real economy is in freefall and interest rates having nowhere to go but down, banks, stock trading platforms and brokerage firms are no longer a safe place for your assets, leaving only gold and “digital gold” as trustworthy investment options.

Fortunately, new, easy to use, secure platforms are increasing investor confidence in crypto as the new hard currency as a hedge in uncertain times.