Is It Time We Revisit Holding Cryptocurrencies?

At the time of writing, I had just completed a purchase of bitcoin which promted the dea of writing this post. for the better part of eight years I've been in financial services and always disliked cryptocurrency until last year. The reality of it was that I was afraid of it becasue it threatened the good ole' job security rather than be open-minded. Recently bitcoin was approaching a recent high of $20,000 USD per bitcoin. What has changed since the last time this high was reached?

Covid Crazy

The Covid19 situation has changed the way people do many things. Technology has been thrust into the forefront of everyday living. Things that were to be done physically are now being pushed into the virtual world - schooling, eating in restaurants, entertainment, work, and the process of purchasing many goods and services. The natural fit for this kind of agenda is using cryptocurrencies. Why? It's an extension of the technologically driven world. They also can be used for the competition to the current financial system at a potentially lower cost.

At the same time Covid has presentented and unique and profitable opprtunity for entrepreneurs. When we think about how we pay for things the first thing that comes to mind is money. Good cold hard cash. It's what makes the world go round right?! Well yes, but there are limitations such as currency exchange and the physical transfer of money and even counting it. With crypto it'll be a universal form of money accepted in any country with little to no restrictions. If small businesses adopted it as a form of payment it gives them buying power.

Acceptance

The last time Bitcoin reached its record high, many institutions were demonizing cryptocurrencies as methods of payment utilized by criminals for terrorism, money laundering, and illicit drug sales. At this point, Mastercard and Visa are linking cryptocurrencies to their credit cards, and Paypal is now accepting Bitcoin to be used on its platform. Many governments are talking about issuing cryptocurrency versions of their traditional currencies. There was also a push from Facebook partnered with major banks and other institutions to issue a cryptocurrency called Libra which didn't go very far but the intention is there. Cryptocurrencies aren't for criminals anymore unless the aforementioned institutions are doing crimes.

I guess you can say I wasn't any different or I could have chalked it up to some irrelevant excuse but the reality was stark. Things are changing and fast. Those who don't embrace it are bound to become a statistic. When it comes down to the brass tax of it. If it works and has upside potential individual opinions of it are obsolete. The caveat is everyone is responsible for educating themselves on it. Being that my approach with my clients is purely educational empowering them to make the best decisions by giving them autonomy. Too much of it can breeds indecision which has the opposite effect. Hence why I think people neglect to educate themselves because it becomes intimidating which causes fear and resistance.

Adoption

The key to any technology is widespread or mass adoption. The more people use something, the more demand there is for its use and therefore the more important it'll become. That is simple economics. With widespread adoption, the systems working in conjunction with the merchandise also begin to vary. Look at the Apple iPod, Microsoft Windows, providers of the internet, and electric cars as examples. With new demand will come to new industries and piggy back products that weren't very useful without the adoption of the initial product.

Vulnerability of Traditional Investments

Thanks to the Covid scenario and the economic depression that's unfolding, investment in stocks and bonds is becoming quite expensive and carries higher risk since the underlying economy is disconnected from the performance of those markets. The high debt level makes real estate investment riskier than in the past also because of the volatility of rental income and people's ability to pay for their mortgages. Cash is a shelter but rising debt and inflation prospects mean that cash has risk too. The concept of diversification means these investments should be held to some extent, but there's now a craving for an asset that complements these products. This new asset is cryptocurrencies. This product allows for diversification from excessive debt, currency debasement, and high inflation.

Similar to gold and the way its valued cryptocurrency has the ability to hedge against inflation meaning you have buying power. For example, an ounce of gold is worth $1,822. In an economic downturn, you'd have a leg up. One bitcoin is worth $20,000! That's a lot of buying power!

Thank you for taking the time to read this, be safe and well.

Edward Fay