We have seen investors and consumers alike deliberate about what the economy will look like post-pandemic. As the world emerges from the crisis, industries that have been shut down will be left surveying the widespread damage, some of it permanent. Consumers will likely be split between the fortunate ones that have been able to work and others whose livelihoods have been compromised as a result of the shutdown.
To mitigate the sever economic impact, governments and central banks globally are printing and distributing extra money to prop up parts of the economy which can no longer function at pre-Covid capacity levels. In the UK alone, an estimated 123bn has already been plugged into the economy and there are estimates that Bank of England stimulus levels could peak at 1 trillion.
Despite the argued necessity of these measures, it is almost impossible not to question the impact on inflation. This massive increase in governmental quantitative easing will have an impact on the global economy, and for asset prices in particular. While inflation is defined as the rate at which the average price level that particular goods and services increase over a period of time, its easier in this context to regard it as the result of a decrease in purchasing power.
As a result, investors will often look safe-haven assets that could provide a hedge against rising prices and avoid the destructive impact of inflation. Gold price is one indicator, and at the time of writing it is seeing a ten-year high while Londons FTSE 100 tumbled 2.8 per cent, and the Eurex Exchange reported a 59 per cent month-on-month decline since April volume. Historically gold had been used as a hedge to protect against economic events including inflation or currency devaluation. Although we can expect this use to continue as a popular option, the pandemic has shown a shift in consumer interest to other safe haven asset classes.
Cryptocurrency is an alternative method of inflation protection which should not be overlooked. Although previously appearing as counterintuitive due to perceived volatility, digital assets have held their own against the stock market, unlike other commodities such as oil. The value of oil has crashed due to vanishing demand and a resulting supply excess causing the price to fall to negative value.
While the comparison between gold and crypto has some nuances the broader theme of Bitcoin as a protective hedge against inflation has broken through especially after the BTC halving we saw in early May. This event has brought attention to Bitcoins controlled supply, with only 21 million max tokens being permitted. At a time when more paper currency is being created in circulation, the amount of Bitcoin halving is causing investors to look away from government-backed paper. While also highlighting the use of cryptocurrency generally as a means of exchange within a more digitally oriented world economy.
In contrast, digital assets have seen a different story. Without the worry of political interference and variable supply rates, cryptocurrencies can benefit from being a less vulnerable investment in times of crisis. We have seen that Bitcoin is still up 22 per cent from a year ago. Newer coins like Tezos are up around 30 per cent so far this year. Both digital currencies highlight that crypto volatility is potentially a sign of the past, especially when compared to the volatility in traditional asset markets.
With crypto trading operating 24/7, 365 days a year with instantaneous settlement while traditional equities still have fixed trading hours and have a settlement cycle of T+3, crypto can provide even more perceived security and flexibility for investors. Cryptocurrencies can also be used as a tool for portfolio diversification and as a method of protection against the economic and political uncertainties to come.
We have witnessed economic disruption before, across ongoing periods of hyperinflation in Venezuela and Zimbabwe more recently, and in Weimar Germany in the 1920s. While it is not helpful to draw comparisons across these countries or their respective banking systems, it is worth taking note of the value crypto offers in terms of being an alternative to unstable national currencies.
Well-known investors such as Paul Tudor Jones are buying bitcoin, saying that his fund may hold as much as a low single-digit percentage of assets in bitcoin futures a measure to protect against a rise in inflation. While Mike Novogratz stated that 2020 will and needs to be Bitcoins year, underlining further investor confidence in digital currencies. Data reinforces this view, by looking at results from the crypto asset manager Grayscale. In Q1, inflows north of $500 million, more than doubling its previous best quarter. Almost a third of this capital came from new investors and most being institutions. Almost every indication that inflationary fears shall add to the tailwinds already powering fresh investment in cryptocurrency, among them institutional involvement and improving regulation.
Bitcoin is inherently structured to encourage a deflationary approach and a relatively stable store of value acting as a true alternative to hedge against inflation, as well as the policies that precede it.
While digital assets emerged out of the embers of the 2008 financial crisis, we can only speculate what technological innovations will rise post-pandemic. Hopefully, the global economy will allow cryptocurrencies to solidify their place in future investment portfolios as it currently demonstrates strong performance and price sustainability.
We are beginning to see the early signs are already there, that investors are turning to cryptocurrencies both as a key tool for diversification and a hedge against uncertainties to come. Ultimately, we are just at the tip of the iceberg when it comes to truly understanding the vast opportunities that digital assets and blockchain for transforming the global economy and we are ready for this challenge.
Stephen Stonberg, COO and CFO, Bittrex Global
Read the original:
Cryptocurrency as an alternative during times of inflation - ITProPortal
- Bitcoin Technical Analysis: What's Next If The Cryptocurrency Breaks Below The $60,000 Level? - Forbes - June 26th, 2024
- Cryptocurrency Prices, Charts, and Crypto Market Cap | CoinGecko - June 26th, 2024
- 1 Top Cryptocurrency to Buy Before It Soars 12,000%, According to this CEO - Yahoo Finance - June 26th, 2024
- Exclusive: Mike Flood is shaking up Congress over cryptocurrency - Cointelegraph - June 26th, 2024
- 1 Top Cryptocurrency to Buy Before It Soars 12,000%, According to this CEO - The Motley Fool - June 26th, 2024
- COVID-induced social isolation drove cryptocurrency investment up 75% - Phys.org - June 26th, 2024
- Proof of Work vs. Proof of Stake: Unraveling the Heart of Cryptocurrency - TheStreet - June 26th, 2024
- Cryptocurrency fraud: How one company helps track and recover digital assets - FOX 7 Austin - June 26th, 2024
- Building the Cryptocurrency Ecosystem Together: JUHBZ Launches Global Community Collaboration Program #JUHBZ - Media OutReach - June 26th, 2024
- Man Convicted of Violent Home Invasion Robberies to Steal Cryptocurrency - U.S. Politics Today - June 26th, 2024
- Exclusive: Mike Flood is shaking up Congress over cryptocurrency - StartupNews.fyi - June 26th, 2024
- Instacoins Partners With Sandbanks Jets to Surpass 100 Cryptocurrency-Booked Flights - Travel And Tour World - June 26th, 2024
- The Ultimate Guide To Cryptocurrency In 2024: Advantages, Disadvantages, And Everything In Between - Blockchain Magazine - June 26th, 2024
- Correction in the cryptocurrency market: sign of trouble ahead? - Kitco NEWS - June 26th, 2024
- Trump courts cryptocurrency advocates with reported talks to speak at Bitcoin convention - Washington Examiner - June 26th, 2024
- Cryptocurrency: 3 Meme Coins Poised To Note 200% Spike This June - Watcher Guru - June 2nd, 2024
- Donald Trump goes from foe to friend on cryptocurrency - Axios - June 2nd, 2024
- Japan's DMM Bitcoin says over 48 billion of cryptocurrency lost - The Japan Times - June 2nd, 2024
- Japan's DMM Bitcoin says over $300 mln of cryptocurrency lost - Reuters - June 2nd, 2024
- The Path To Becoming A Millionaire With Cryptocurrency - The Crypto Basic - June 2nd, 2024
- Trump's reversal on cryptocurrency reeks of desperation and hypocrisy - MSNBC - June 2nd, 2024
- Coinbase vs. Robinhood: Which one is better for cryptocurrency investing? - KKCO - June 2nd, 2024
- Cryptocurrency: 3 Coins To Buy If You're A Die Hard Web3 Fan - Watcher Guru - June 2nd, 2024
- Cryptocurrency: Top 3 Coins To Buy For 2X Profits In June - Watcher Guru - June 2nd, 2024
- Cryptocurrency Payment Options for Safety in Various Industries - Innovation & Tech Today - May 15th, 2024
- Cryptocurrency: Mass Institutional Adoption Underway, with Bitcoin, BlockDAG Network, and Ethereum Value Surge - Yahoo Finance - May 15th, 2024
- The Ultimate Cryptocurrency to Buy With $1,000 - The Motley Fool - May 15th, 2024
- What Is Ether (ETH), the Cryptocurrency of Ethereum Apps? - Investopedia - May 15th, 2024
- Here Is What 6 Silicon Valley Giants Think About Cryptocurrency - CryptoPotato - May 15th, 2024
- Top 3 Cryptocurrency to Invest Now According to Reddit: Bitcoin, Ethereum, Furrever Token - Yahoo Finance - May 15th, 2024
- Solana Foundation Payments Head Discusses the Evolution of Cryptocurrency in Payment Ecosystems - CoinTrust - May 15th, 2024
- Bitcoin Coinbase Premium: Key to Predicting Cryptocurrency Trends? - West Island Blog - May 15th, 2024
- Cryptocurrency Price Today: Bitcoin Continues Roller Coaster Ride As It Dips Below $62,000 Again - ABP Live - May 15th, 2024
- Cryptocurrency Immutable Down More Than 7% Within 24 hours - Investing.com UK - May 15th, 2024
- Cryptocurrency Ethereum Classic Down More Than 3% Within 24 hours - Investing.com UK - May 15th, 2024
- May's Premier Cryptocurrency Picks: Surging Ethereum, Hump Token, and BlockDAG - The Merkle News - May 15th, 2024
- Cryptocurrency Filecoin Decreases More Than 3% Within 24 hours - Investing.com UK - May 15th, 2024
- Easy STPT Claim. Navigating the realm of cryptocurrency | by ATHVertcoinDecentralizedFinanceBroker | May, 2024 - Medium - May 15th, 2024
- Cryptocurrency Aptos Falls More Than 4% In 24 hours - Investing.com UK - May 15th, 2024
- 1 Top Cryptocurrency to Buy Before It Soars 5,000%, According to Cathie Wood - The Motley Fool - April 19th, 2024
- Cryptocurrency Prices And News: Bitcoin Falls Below $63000 Ahead Of Halving - Investor's Business Daily - April 19th, 2024
- Central Bank of Fiji Warns About Penalties For Purchasing Cryptocurrency Regulation Bitcoin News - Bitcoin.com News - April 19th, 2024
- Cryptocurrency Market News: Spot Bitcoin ETFs Shift to Outflows Ahead of Halving - Investopedia - April 19th, 2024
- Cryptocurrency: 3 Coins To Buy for Long-Term (10x) Profits This Bull Run - Watcher Guru - April 19th, 2024
- Cryptocurrency: Top 3 Coins That Could 10X In The Bull Run - Watcher Guru - April 19th, 2024
- RANAEX Revolutionizes Cryptocurrency Trading with Team Introduction and Licensing Milestone - AccessWire - April 19th, 2024
- Cryptocurrency: Top 3 Coins To Watch This Weekend - Watcher Guru - April 19th, 2024
- 1 Top Cryptocurrency to Buy Before It Soars 3,186%, According to Cathie Wood - The Motley Fool - April 19th, 2024
- Bitcoin halving on deck here's what to expect (Cryptocurrency:BTC-USD) - Seeking Alpha - April 19th, 2024
- Cryptocurrency: 3 Coins That Could 2X Post Bitcoin Halving - Watcher Guru - April 19th, 2024
- 3 Must-Know Facts About Solana, Before You Buy the Cryptocurrency - The Motley Fool - April 19th, 2024
- Cryptocurrency: Top 3 Coins to Watch This Week - Watcher Guru - April 19th, 2024
- Bitgets COO takes center stage to discuss the future of Cryptocurrency at Blockchain Life Week 2024 - ZyCrypto - April 19th, 2024
- Cryptocurrency Arbitrum's Price Increased More Than 4% Within 24 hours - Benzinga - April 19th, 2024
- M20 Chain and MCoin: Pioneering the Future of Cryptocurrency - NewsBTC - April 19th, 2024
- Cryptocurrency: 3 Coins That Could Hit All-Time Highs This Week - Watcher Guru - April 19th, 2024
- 1 Super Cryptocurrency Could Soar to $200,000 by 2025, According to a Wall Street Analyst - The Motley Fool - March 21st, 2024
- Compass Coffee Makes a Bold Move By Accepting Cryptocurrency in D.C. - Eater DC - March 21st, 2024
- Beyond Viral Trends: Ecoterra's Mission for Sustainable Wealth in the Cryptocurrency World - Yahoo Finance - March 21st, 2024
- Montenegro appeals court confirms 'cryptocurrency king' will be extradited to South Korea - Fox News - March 21st, 2024
- BBB: What you need to know about cryptocurrency fraud - WATN - Local 24 - March 21st, 2024
- Cryptocurrency Price on March 20: Bitcoin tumbles 6% to below $61,000 ahead of Fed meet outcome - The Economic Times - March 21st, 2024
- I Made $31,000 by Investing In This High-Risk Stock and Cryptocurrency - Yahoo Finance - March 21st, 2024
- When Will The Cryptocurrency Market Bounce Back Up? - Watcher Guru - March 21st, 2024
- The Trump-themed "MAGA" token has appreciated more than 700% is it the next hot cryptocurrency trend? - KTVZ - March 21st, 2024
- SEC seeks to classify ether as a security - report (Cryptocurrency:ETH-USD) - Seeking Alpha - March 21st, 2024
- Shiba Inu Is Skyrocketing: Is It a Top Cryptocurrency to Buy Right Now? - The Motley Fool - March 21st, 2024
- ETMarkets Emerging Investment Opportunities: Minting confidence in cryptocurrency, Edul Patel dives into the Bitcoin ... - The Economic Times - March 21st, 2024
- The Ultimate Cryptocurrency to Buy With $1,000 Today - Yahoo Finance - March 21st, 2024
- This Is Arguably the Most Important Use Case for Bitcoin and Cryptocurrency, According to Brian Armstrong - The Daily Hodl - March 21st, 2024
- Goldman Sachs Predicts the Future of the Cryptocurrency Market - Watcher Guru - March 21st, 2024
- Bitcoin slips to about $63,000 as the cryptocurrency tracks for third straight losing day - MSN - March 21st, 2024
- Montenegro court confirms mogul known as 'cryptocurrency king' to be extradited to South Korea - Bowling Green Daily News - March 21st, 2024
- Game Changer: How Cryptocurrency is Revolutionizing the Sports Industry - CryptoDaily - March 21st, 2024
- Cryptocurrency: Top 5 Coins To Buy During The Dip - Watcher Guru - March 21st, 2024
- Backsliding Bitcoin (BTC) and Ethereum (ETH) Drop 10%, Cryptocurrency Professor Anticipates Option2Trade Will Fill ... - The Portugal News - March 21st, 2024
- 1 Top Cryptocurrency to Buy Before It Soars 2,139%, According to Cathie Wood - The Motley Fool - March 13th, 2024
- Trump indicates he might be tolerant of cryptocurrency if elected - Cointelegraph - March 13th, 2024
- Cryptocurrency Miners Need to Report their Energy Use - Earthjustice - March 13th, 2024
- Cryptocurrency: 3 Coins Trading in Cents Set To Reach $1 - Watcher Guru - March 13th, 2024