As of this point in time, we are living in the midst of what will quite likely turn out to be the worst economic crisis of our epoch. With jobs being lost and businesses shutting their doors, governments have been desperate to inject liquidity into their economies.
Consequently, many have begun asking the question – are we headed on the road to hyperinflation in a post-COVID world? With so much liquidity in the economy and thousands of investors searching for a way out, hyperinflation may be a real prospect.
However, rising levels of unemployment coupled with extensive quantitative easing means that businesses will be forced to drop the prices of goods offered to remain competitive. As a result, some economists see price deflation on the near horizon.
Given that the threat of mass unemployment is a spectre that may haunt us for years to come, it’s highly unlikely that consumers will have any incentive to get spending. So, in an effort to kickstart the economy, banks and other financial institutions have begun dropping interest rates on savings and loans. This means that many may be better off keeping their cash under their mattresses instead of a savings account.
So, with so much economic uncertainty on the horizon, let’s take a look at why 2020 the year for may be just investing in cryptocurrency.
- Bitcoin has remained stable post-halving
Bitcoin and other cryptocurrency valuations have performed solidly throughout 2020, finally breaking the $10,000 barrier for the first time since 2018.
This could be a result of a successful halving, which saw a change in the mindset of investors. Originally, many feared that Bitcoin prices would immediately plummet post-halving, citing fears of a market adjustment.
However, many were proven wrong when Bitcoin prices actually appreciated and remained stable post-halving. With the number of miners dropping as a result of falling profitability, a reduced supply of Bitcoins would naturally place upwards pressure on prices.
Hence this could explain why the sentiment for Bitcoin has remained relatively bullish despite uncertain economic conditions.
- Bitcoin as an alternative investment
With so much liquidity in the market, investors have turned to a variety of assets in order to hedge the value of their money.
In a nutshell, this means converting fiat currency into liquid assets such as stocks, bonds, watches and even works of art. All of this is done in order to maintain the value of one’s investments in the face of depreciation.
Cryptocurrency with its relative independence from market forces has been proven to be an attractive store of value. Being the world’s most popular cryptocurrency, we’ve begun to see how investors have turned to Bitcoin as a means of hedging.
Despite a slow start in 2020, institutional investors have begun showing an interest in Bitcoins post-halving.
Limiting the quantity of Bitcoins available and halving the amount of BTC awarded to miners is an effective way of controlling inflation. Something which makes Bitcoin an attractive investment for both large and small investors.
Nonetheless, make sure you invest into a crypto wallet app, such as Tezro.com.
- The stage is set for a sudden increase in BTC valuations
The end of 2020 is set to be a contentious year for Americans as they go to the polls. With President Donald Trump recently being tested positive for COVID-19 and increased turmoil in the United States, one can only guess at what is coming next.
Despite coming to an impasse with regards to a new stimulus bill, it is highly likely that the Trump administration will announce a new round of stimulus packages to keep the economy afloat.
This coupled with the Fed’s reluctance to raise interest rates will only serve to push investors towards Bitcoins as they attempt to get ahead of rising rates of inflation.
An increase in demand for Bitcoins could see valuations appreciate significantly towards the end of 2020 as investors drop the Dollar in favor of Bitcoins.
With a controversial election, increased economic uncertainty and plenty of liquidity in the economy, it’s anyone’s guess as to what happens next. Fiat or crypto currencies, the choice is yours entirely.