Is Crypto a Safe Haven Currency During a Crisis?
At this point, its no secret that the pandemic has caused many problemsboth politically and economicallyover the past year. While there are parts of the world on their way to recovery, other countries can still feel the gut-wrenching effects of COVID-19. Colombia, for example, is still experiencing the devastating effects of the coronavirus. There have been outbreaks, protests, and poverty. Well, crypto could possibly be that way out. Being in a state of unrest  The financial systems of any country are usually closely tied to its corresponding government. This means that when political or economic unrest hits, it could mean a general loss of confidence in the government. That loss of confidence, in turn, could possibly negatively impact the financial landscape and when that unrest occurs, native currencies could suffer. On the other hand, the contrary seems to be the case when it comes to cryptocurrencies. Cryptos decentralized nature can give people a sense of autonomy, giving them true power over their finances. With crypto, theyre not at the mercy of any financial institution or governmentdecentralization puts everyone at the same level. Keeping your money safe with crypto  Cryptocurrencies like Bitcoin (BTC) make excellent cases as a store of value asset (or safe-haven currency), making them a viable means of keeping your money safe. Before we get into that, however, lets first define what a store of value is and what characteristics are required for an asset to be a good one. Simply put, a store of value asset is something that can hold its value over time. This means that if you were to buy an asset today in hopes of keeping it as a store of value, it would have to be able to stand the test of time and retain its value well into the future. A good store of value must have two characteristics: durability and scarcity. Lets say that you buy an apple for a dollar. Its safe to say that itll probably be worth nothing at that point. Itll probably be in a better condition compared to the apple after a few years, but the question we have to ask is: how hard is it to find dry pasta? The issue here is that dry pasta is cheap and readily available. As more dry pasta is created, the value goes down, taking away its potential to be a store of value. A store of value needs to have both characteristics to be viable. Why BTC could be a good store of value  Now that we know what makes a good store of value, we can already see that BTC is both durable and scarce: (1) it doesnt have a physical footprint, which means that durability doesnt apply; and (2) with it being designed to have a maximum supply of 21 million, BTC is scarce. Additionally, Bitcoin has a couple of other traits that further its case to be a great store of value:  First, its storable. If youre going to hold an asset as a store of value, youll probably need a place to keep it. With a more traditional asset like gold, youll probably need a vault or safe to store it. In BTCs case, however, all you need is a Bitcoin wallet. Not only is BTC storable, but its also portable. Compared to the vault or safe youll need for storing gold (which we dont need to tell you isnt very portable), youll only need your phone and an app to store BTC. Remember that Bitcoin is digital, so even if youve got all the BTC in the world, theyll fit right in your pocket. Bitcoin is also easily divisible. You dont actually have to buy one whole BTC to get started because each Bitcoin can be divided into 100 million units called satoshis (0.00000001 BTC). Now, compare that to gold and the stress of transferring a small amount of gold to someone else. Yikes. As BTCs value has risen over the past year, security will probably be a factor for inspiring holders. Luckily, Bitcoin is easily verifiable, meaning that its nearly impossible to counterfeit or duplicate. This is because the blockchain, the technology BTC is built on, constantly verifies and validates each block of transactionsmeaning that you can trust each block without having to know anything about the miner who created it. Lastly, Bitcoin is fungible, meaning its mutually interchangeable and uniform. This simplifies the exchange process and allows for the exchange of goods in multiple locations and markets. Together, all these aspects of Bitcoin give people the power of financial freedom, allowing people worldwide to use their BTC as a store of value. Using crypto for wealth preservation  Over the past few years, weve seen crypto grow in terms of adoption. As this continues, well start to see more real-use cases pop up, leaving behind the days of these digital assets being purely used for investment. Peer-to-peer (P2P finance) has taken crypto to a new level, leading users to a flurry of new possibilitiesincluding making quicker and more manageable payments, sending cheaper remittances, and, yes, preserving your wealth. You can use your crypto as a viable money reserve. In times of financial disaster, it can always help to have a money reserveand crypto could be an option for that. The security and transparency of a blockchain create a safe and secure environment for all its users and cryptos have no geographical borders, allowing funds to be sent and received from anywhere in the world and at any time. Keeping your money in crypto can also protect your money from hyperinflation. Lets say that your native currency is going through an extreme case of inflation and the value of your money plummets more every day. By converting your money into crypto, you can protect it from losing any more value (and even make money if crypto prices go up). A light in the darkness  Crypto can be a saving grace when it comes to keeping your money safe in times of political or economic turmoil. A large portion of the world still remains unbanked, which could be a massive problem for people when these problems arise. Crypto gives these people a way outa financial passport that gives them access to affordable banking and a global free trade system. This has been the case for many Colombians trying to find their way out. By experiencing the benefits of P2P finance first-hand, theyre able to pick themselves back up and enjoy new benefits through financial liberation. One of the biggest misconceptions about crypto is that its first world when, in fact, its the developing countries that actually show more openness in adopting them. These are the countries that prove that crypto isnt just for investment; it could also be a means of survival and prosperity. When political or economic unrest sweeps a country, people are forced to take matters into their own hands. Cryptocurrencies have the power to give people a fighting chance by giving the power back to the people. These digital assets give people the financial control that people deserve, and thats something worth believing in.