The Covid-19 pandemic has exposed that one’s assets are not necessarily safe. Stock markets were riding high but, in the blink of an eye, they were plummeting, losing as much as 60 percent of their value in less than a month. It showed how truly precarious a person’s investments can be.
The economic crisis caused by the virus has people scrambling to figure out what is the smartest investment to make. Traditionally investors have enjoyed the stability of gold and even the U.S. dollar as a sure way to come out ahead. But nowadays a lot of experienced investors have either directly invested in Bitcoin or at the very minimum have discussed several strategies including cryptocurrencies. The Investors on this list have been known in the industry for being open-minded when it comes to Bitcoin.
Creating More of a Problem
When the world shutdown and governments across the globe had their citizens shelter in, this meant that hundreds of millions of people were suddenly out of a job. With no income, people were clamoring for the government to help them, and many stepped up with programs to provide money and other benefits to help people to meet their basic needs.
The United States was one such country, which approved three stimulus bills pouring over $6 trillion into the economy. This money was literally created out of thin air, meaning it had no real backing. Plus, the Treasury Department is seeing a rapid decline in revenue due to people not paying taxes and a decline in business tax revenue as well.
The U.S. Dollar is a fiat currency, meaning it is created by some government agency or regulatory agency. In this case, the U.S. Mint. In these stimulus bills, not much actual currency was created. Instead, it was deposited into the accounts of individuals and businesses, which has caused the dollar to decline in value.
A little teaching is required. If you are familiar with the laws of supply and demand, then you know that something that is in shorter supply has a higher value. There is less of it, so its value goes up because people are willing to pay more to get it.
The same principle works in currency. When there is less of a currency in circulation, then it has more value. When there is a tangible asset that backs up that currency, then it has even more value. Unfortunately, the printing of all this currency created neither. Now there is a glut of U.S. currency with no additional backing. In fact, the backing has declined in value, making the dollar far less valuable.
These factors have made the dollar a terrible investment. What makes it even worse is that the problem is likely to get worse before it gets better.
What Is the Right Investment?
In troubling times, gold has traditionally been the choice for investors. When the values of currencies decline, the price of gold goes up and this is the case here. The price per ounce of gold to start 2020 was about $1500. Now it is over $2000 per ounce and is still climbing. That is in direct response to the flood of U.S. currency into the economy.
With the value of gold increasing rapidly, it would be easy to turn to this as the investment of choice, but Bitcoin is another avenue that many investors are following and with good reason.
It starts with the reality that the same factors that increases the price of gold, increases the cryptocurrency’s value as well. If the value of the dollar is declining, then the value of Bitcoin in comparison is increasing.
There is also another major factor that is much like gold. Bitcoin is not linked to any government authority, mint, or other agency. This is a completely standalone currency meaning it cannot be influenced or regulated by any country. This is what makes gold so popular. If a country is having economic troubles, the value of gold does not suffer. This is true of Bitcoin as well.
Many worry that the volatility of Bitcoin makes it a risky investment and there is some truth to that. At the end of 2017, the price shot up to nearly $20,000 per coin, only to plummet months later to a third of that value. That has many scared to jump back into the cryptocurrency market.
However, that should not scare off investors. All countries are creating larger amounts of fiat currency to help during the pandemic, which is only going to drive up the value of currencies like Bitcoin. It is not created by any agency, so there is not going to be a rapid influx of the currency.
The truth is that Bitcoin has just as much value as gold and maybe even more. For those looking to have a safe place to invest your money during trying times, there may be no better choice.