Protecting Your Money In Times of Political and Economic Turmoil
At this point, it’s no secret that the pandemic has caused many problems—both politically and economically—over 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. With that, what else is there for a citizen to do? How can they take matters into their own hands when all else fails?
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. That’s when people start thinking: is my money safe in the bank?
On the other hand, the contrary seems to be the case when it comes to cryptocurrencies. Crypto’s decentralized nature can give people a sense of autonomy, giving them true power over their finances. With crypto, they’re not at the mercy of any financial institution or government—decentralization 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, let’s first define what a store of value is and what characteristics are required for an asset to be a good one.
What is a store of value?
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.
What makes a good store of value?
A good store of value must have two characteristics: durability and scarcity.
Let’s say that you buy an apple for a dollar. Upon purchase, it definitely has intrinsic value—everybody has to eat, right? However, if you were to store that apple in a safe for a couple of years, do you think it would retain its value over time? It’s safe to say that it’ll probably be worth nothing at that point.
But what if we take something more durable, such as dry pasta? Will it then hold its value? It’ll 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 doesn’t have a physical footprint, which means that durability doesn’t 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:
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First, it’s storable. If you’re going to hold an asset as a store of value, you’ll probably need a place to keep it. With a more traditional asset like gold, you’ll probably need a vault or safe to store it. In BTC’s case, however, all you need is a Bitcoin wallet.
Not only is BTC storable, but it’s also portable. Compared to the vault or safe you’ll need for storing gold (which we don’t need to tell you isn’t very portable), you’ll only need your phone and an app to store BTC. Remember that Bitcoin is digital, so even if you’ve got all the BTC in the world, they’ll fit right in your pocket.
Bitcoin is also easily divisible. You don’t 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 BTC’s value has risen over the past year, security will probably be a factor for inspiring holders. Luckily, Bitcoin is easily verifiable, meaning that it’s nearly impossible to counterfeit or duplicate. This is because the blockchain, the technology BTC is built on, constantly verifies and validates each block of transactions—meaning that you can trust each block without having to know anything about the miner who created it.
Lastly, Bitcoin is fungible, meaning it’s 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, we’ve seen crypto grow in terms of adoption. As this continues, we’ll 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 possibilities—including 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 reserve—and 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. Let’s 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 out—a 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, they’re able to pick themselves back up and enjoy new benefits through financial liberation.
One of the biggest misconceptions about crypto is that it’s “first world” when, in fact, it’s the developing countries that actually show more openness in adopting them. These are the countries that prove that crypto isn’t 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 that’s something worth believing in.