When an economic crisis hits, inflation is sure to follow. The problem is that to keep the economy afloat, many governments start printing money to keep interest rates down. The result is an out of control inflation. Sure, it does good things for the short term, but many people see things costing more money as their money’s value has been reduced.
And any money saved, suddenly is worth less. Which is why people like to start buying up commodities like gold to put into a safe haven which is not given to inflation. And now even bitcoin is becoming a favorite among people looking to protect their assets.
Is this a good idea though? Is it actually a safe haven like many people think that it is? In this article, we will take a closer look to see if it is a good place to park your money during the recession.
One of the biggest things holding people back from investing heavily in cryptocurrency is the crash of 2018. After reaching heights of almost $20,000 in 2017, the price ended up less than $5,000 a few short months into 2018. Now that bitcoin has blown past $20,000 in value, people are still wary about getting involved for fear of a repeat.
Luckily, not all cryptocurrency are created equal. There are stablecoins that are tied to the value of the dollar and offer less volatility than a traditional cryptocurrency. This is the best of both worlds and has coins like Tether gaining in popularity. If you see the names of these altcoins and have wondered what is USDT then you aren’t alone.
It seems that these stablecoins are flying under the radar while being enjoyed by actual investors and not just cryptocurrency bandwagon riders.
Though they do feel a bit of the influence of inflation since they are tied to the value of the US dollar, they still offer good value since the value of the coins can increase when their popularity does.
Downside of safe havens
There is one absolute when you are dealing with a place to protect your assets whether we are talking about gold or cryptocurrency. And that is there is not a correlation with the markets so much.
So, if you have your money in these safe havens and then the market is rising, this doesn’t mean that bitcoin or gold or whichever commodity you’ve bought into will also see a rise. You may miss out on some really nice gains that would have come via the traditional investing routes.
This is a risk that many are willing to make for the stability that they gain. Those market gains can be wiped out overnight in some cases which doesn’t usually affect the price of bitcoin or gold.
If all you are doing is trying to avoid losing your assets then this is a small price to pay.
*This article has been contributed on behalf of Paxful. However, the information provided herein is not and is not intended to be, investment, financial, or other advice.