Updated: Jul 13
At a time when most agree that cryptocurrencies should be the last thing on a sick world's consciousness, investors have crypto high up their priority lists. As news cycles are flooded with reports of new infections, deaths and Covid-19 related unrest, investors are looking at Bitcoin, among others, as a safe haven to hedge against a cornered US dollar. As the dollar takes a thorough beating, food prices are going up not to mention disappearing jobs, angry protesters and an overall frustrated society.
As others cry and look on in despair, there are some that are thriving. Jeff Bezos is one of the smiling few having seen his wealth portfolio hit the two hundred billion mark. Anyone who was involved in any “stay at home” stocks like Facebook, Snapchat, Zoom and Dominos has also a great lockdown period. I’ll tell you who else is about to potentially have an investing blast: crypto investors. I know what you all heard, buy gold, buy stocks, stock up on food and toilet paper, stay indoors, and wash your hands. “Buy Bitcoin” is not a statement you see too often, unless a real huge personality like Robert Kiyosaki touches on it while shouting out other investment vehicles.
Stocks, property and commodities may be good, but crypto is a firebrand. Bitcoin, the S.I unit of all cryptos, has outperformed all asset classes in existence during this turbulent year. It’s retained the title every year since 2017.
As most old school investors talk about and tend to the hedges they have always known, BTC keeps pulling the shirts of those asset classes with ease. Bitcoin has been like the smart kid in class who raises her hand to answer questions, gets passed over, and then ends up acing all the tests in vigorous defiance.
Why look into crypto?
You should look into crypto, especially Bitcoin, the same way you should look at other historical safe haven assets out here. Of course talking points have been traded as to whether Bitcoin is a safe haven or not, and most people are on the fence about this issue. None with a keen eye though can deny Bitcoin’s ability to rise up the chart whenever anti-fiat chatter starts being heard. So what is driving all this pressure on the US dollar that might see an energized Bitcoin?
1. Unsustainable debt levels
US debt has been a long term problem, even Pre-Covid. Three trillion dollars in revenue every year barely scratches the surface for a government that owes about 25 trillion. The U.S government is like that hardworking struggling millennial that only makes $50,000 a year and owes about a quarter million in student loan debt. To make the picture a little grimmer, imagine if that millennial were just made to take a pay cut or reduc thier hours? We all agree that the individual’s future looks bleak unless something big happens to turn it all around.
That struggling millennial is the US government, and the pay cut alludes to the lack of economic growth precipitated by the pandemic. Those of us in the investing space know too well that any whiff of economic trouble usually sends investors out the door quickly as they seek to hedge against a pressed dollar. Bitcoin is a very likely destination for investors, both young and old.
2. Maxed-out national credit card
After the first stimulus package dragged its way into the American people’s mailboxes, the US congress has been in weeks of negotiations over the second package. It doesn’t help that Congress is filled with republicans and democrats who are more into sticking it to each other than getting a deal over the line.
The gap between what both parties are trying to do also dents the dollar.
Democrats want to keep the stimulus checks coming like the country is sitting on unlimited stimulus pots of gold, while the Republicans seem to be more focused on protecting the wealthy from taxes that might lead to economic relief. This tug of war doesn’t help the dollar, and it could inspire a massive virtual token race.
3. Exhausted economic tools to deal with the crisis
With more stimulus packages are handed out, the more money being printed and the more interest rate drops, we will eventually discover the floor. The floor will be cold, rough and one that we can’t dig past. We will reach a point where more checks can’t be produced, and interest rates can’t drop any further. So let’s go back to the hardworking but slowly staving millennial that owes $250,000, who been made to take a pay cut, and has used up all her savings. This is the situation America may find herself in soon. Congress and the FED may soon run out of economic buttons to push, and investors are watching intently. There will be no hesitation to hop onto hedge asset classes.
The US debt was always going to be a problem and the pandemic has exacerbated the situation. Most experts predict a great debasement of the dollar over the next decade. It simply means that investors are assessing the long term effects on the dollar and slowly filing divorce papers against it. The fallout may greatly benefit cryptocurrencies, so you may want to be close when the cake starts getting passed around in the near future.
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