Forget the economic turmoil experienced during the Great Depression in the 1930s. Countries are already experiencing a significant financial crisis as the world’s superpowers battle for a global economy share. Is everything lost? Not really. Smart investors are turning to alternative investment vehicles. Those that survived and thrived after the worst recession in history will attest to the fact that you always need a contingency plan when it comes to money. Balancing your portfolio and hedging wealth using Bitcoin is one of the best ways to cushion oneself from economic shock.
Is the world in a financial crisis?
Campbell Harvey, a professor of finance at Duke University, predicted a recession would occur in 2020 or 2021. Most financial analysts and global economic experts agree that all is not well when it comes to the health of the global economy. Now more than ever, nations are displaying classic signs of financial malnutrition. For example, the escalating trade wars between the United States and China have a ripple effect on financial institutions and companies worldwide.
The US economy, which was considered one of the strongest in the world, is no longer as buoyant as before. The corporate giveaways and tax cuts instituted by the Trump administration have resulted in a high cost of loans and reduced production. In Germany, Olaf Scholz has hinted on the injection of €50bn into the economy to subdue an imminent recession. China, another superpower, hasn’t recovered from the 2008 financial crisis and is headed for a full-blown debt crisis.
How can Bitcoin help hedge against a financial crisis?
When most wealth holders think of alternative ways to preserve their assets, the first thing that comes to mind is holding gold. According to Goldman Sachs, the price of gold could hit an all-time high of $2300 by 2020 as investors look for alternative investment vehicles. However, the high storage and insurance costs of this precious metal are a headache to investors. The following are the ways and reasons why Bitcoin should be a priority to any investor looking to remain safe in the ongoing financial crisis.
Cash is too risky
Being liquid is necessary to survive daily. However, the increased rumours of the creation of digital currencies by different states and the nightmare of Covid-19 make holding on to cash too risky. Advanced technology has opened the world to paperless financial transactions. People are making smart decisions about their money and converting it to other forms. Bitcoin, though highly volatile, is still a great choice since it is decentralized and doesn’t depend on any government policies to transact and thrive.
Increased inflation
One of the aftermaths of the Covid-19 pandemic is that most countries will opt to bring the production of goods back to their home soil. Such actions will lead to increased prices of goods in the global market, which will translate to inflation. As history has shown, investing in assets such as gold and cryptocurrencies is the best hedge against inflation. Bitcoin’s price has continued to rise through the years and it’s simply smart to invest in this incredible digital currency.
The founder of Bitcoin is believed to have created the coin to help cushion investors against the flaws of a financial system that triggered the 2008 recession. Since its supply is fixed at 21 million, no government can cause its devaluation through printing more money. Citizens of countries such as Venezuela, Zimbabwe, and Argentina can attest to the power of Bitcoin as a hedge against inflation.
High liquidity
During a financial crisis, liquidity is critical. At the moment, companies are terminating jobs at alarming rates, and the impact of this can already be felt. Cash strapped individuals are looking for the fastest way to convert their assets into an easy way to meet their daily needs. It’s times like these that people realise the importance of an investment that can be quickly liquidated. At the click of a button, one can promptly transact Bitcoin and meet their financial obligations during a crisis.
No geographical barriers
Now more than ever, people have come face to face with the reality of geographical barriers. Investors have realized that an investment vehicle that can move assets around the world without any obstacles is the best option. What better choice of investment to achieve this than by using Bitcoin? The top cryptocurrency doesn’t require a third party to transact, and at the tap of the screen, assets can quickly move from one corner of the globe to the next.
A little trip down Bitcoin’s history lane
To understand this amazing investment asset, we need to look at the history of Bitcoin. Would you believe that there was a time that you could purchase Bitcoin for less than $10? You’ve most probably heard of the guy who bought two pizzas using 10,000 Bitcoins. The world’s first cryptocurrency has experienced a volatile ride to the top since it was invented in 2009.
Bitcoin: The ideal virtual hedge during a financial crisis
Following a highly bullish market in the past few weeks, Bitcoin has surpassed the $200 billion mark, and current market capitalization stands at $208 billion according to Coinmarketcap.com. Such figures are impressive for a coin that is less than 15 years old in the market. Amazingly, its market cap is higher than that of Intel or Cocacola, and it seems there’s no stopping this financial beast.
Now more than ever before is the time to get into the Bitcoin bandwagon. As an investor, you always need to be a step ahead of the rest, and digitizing your portfolio is the way to go. The Bitcoin bus ride has picked momentum, and soon it will be a worthy rival against gold as a haven for storing assets amid a financial crisis.
