Earlier this week, we examined how our upcoming cashback app can help soften the blow of economic downturns. But today, we’ll discuss why owning digital assets may very well be in your best interest.
If you’re paying attention to the increasingly bold writing on the wall, the globe’s monetary footing is on shaky ground. The central banking system has a manipulative stranglehold on cash supplies. A trade war between the world’s two largest economies continues to escalate. It’s evident that trying times are around the corner.
Of course, we’re not trying to predict the future here. Just like we can’t tell you the price of Bitcoin come November, we don’t know what will bring the next worldwide monetary meltdown.
But what we can say is that diversification holds the key to building lasting wealth. There’s solid reasoning behind the term, “don’t put all your eggs in one basket.” And as digital assets continue to establish credibility as a viable store of value, more investors are adding crypto to well-rounded portfolios.
So, can bitcoin and its ilk provide peace of mind during these days of financial uncertainty on a global scale? Maybe, maybe not. Either way, let’s take a look at some potential scenarios.
The Case for Digital Gold
Before we mine for information, let’s define the three main ingredients of things we consider ‘money.’ Long, long before any of us roamed the earth, precious metals — primarily copper, silver and gold — each became mediums of exchange, units of account, and stores of value.
Today, physical gold reigns supreme as the go-to asset for protection against inflation and decreased purchasing power. Why is gold so valuable? Well, because we all believe that its scarcity, use-cases, and anti-corrosive properties justify — at today’s price — roughly $1,500 per ounce. Yes, even the value of the world’s oldest form of money is speculative.
On the other side of the medallion is bitcoin. Like gold, bitcoin’s supply is finite. But unlike shiny yellow metal, bitcoin is easy to store, divide, transport, authenticate, and even conceal. To illustrate how cryptocurrencies dominate the battle of physical against digital, let’s consider $1M in gold vs. the same value in crypto.
One of the crypto industry’s mainstays is the ubiquitous hardware wallet. These days, Ledger’s Nano series leads the niche. The company’s Nano S weighs less than 3/4 of an ounce, and the tiny little box’s longest dimension is only 2 and 3/4 inches.
Now, with a hardware wallet — same goes for our upcoming mobile crypto wallet — there are no restrictions on storage value. Stash a few dollars worth of cryptocurrencies or billions and trillions. It’s all the same.
For the sake of our example, let’s imagine holding onto $1M in gold bars. Your storage receptacle measures in feet, and weight is a serious issue. A 1-kilo (2.2 pounds) gold bar sets us back a cool $50,000, which means we’ll need 20 bricks — 44 lbs. — to reach our goal.
It’s exponentially easier to safeguard a small, lightweight hardware wallet than pounds and pounds of unwieldy precious metals.
Now, we’re not here to hate on gold. It’s certainly a viable method for varying your collection of assets. But that’s not to say it doesn’t have its drawbacks.
And let’s not forget volatility — always a concern when choosing methods for holding onto long-term value. Cryptocurrencies bear the brunt of ridicule for their wild price swings. Yes, gold’s price is also volatile. But it won’t double or even triple over 24 hours.
However, we imagine that when gold neared its 11th birthday — bitcoin’s technical whitepaper was born on October 31, 2008 — its price was all over the map. But unfortunately, since ancient recordkeeping practices meant using stone and chisel, historical pricing info is difficult to obtain. Point is, stability is coming, but the industry’s yet to finalize the details.
Beware Governmental Interference
Going beyond cryptocurrencies’ convenience factor is their difficulty to confiscate. Once any given amount of crypto is in a personal wallet — so long as its private keys remain private — those funds are virtually impossible for outsiders to access.
In times of extreme economic duress, governments target the assets of ordinary citizens. Currency devaluation easily erodes the value of savings accounts, bonds, and stocks. As a result, cash grabs tend to occur under the guise of government-mandated “requests” for citizens to voluntarily donate their gold.
The underlying reason is that since traditional financial instruments are someone else’s liability, they’re ultimately under the government’s control. Physical gold, on the other hand, is under control of its rightful owner.
And don’t go thinking that asset seizures only occur in dictatorships ruled by certified lunatics. Australia, Germany, Italy, India, even the U.S., have all seen leaders come after their citizen’s gold at some point in history.
More recently, countries, including Argentina, Venezuela, and Zimbabwe, saw their central banks push their respective nation’s currency over a fiscal cliff. In those unfortunate circumstances, residents turn to gold — and, more and more frequently, cryptocurrencies — in an attempt to preserve wealth while sidestepping censorship.
It’s important to note here that, contrary to blockchain newcomers’ belief, bitcoin is anything but private. Your bitcoin wallet address is public domain viewable by anyone with access to a block-exploring website. And where bitcoin leaves its users’ privacy exposed, other blockchain projects are filling the gap.
Where bitcoin is crypto v1.0 and ethereum is v2.0, many iterations have come along to steadily expand crypto’s utility. And our project’s native cryptocurrency — RFOX — is no exception.
Powering the technological aspects of RedFOX Labs is Komodo Platform, which began its life of innovation as a privacy coin. Recognizing a need for cryptographic privacy, team KMD implemented and invented cutting-edge tech to shield transactions from prying eyes.
What began as a means to conduct private peer-to-peer transactions is now a modular framework enabling organizations to construct customizable blockchain networks featuring bitcoin-level security.
And for our part, RedFOX is working to ensure our Komodo-powered network’s coin has real-world applications in real-world businesses. In other words, rather than create digital assets only to force them into a limited-use ecosystem, we mint coins that serve multiple purposes.
Our native coin serves as the global currency within the RFOX-KMD enterprise world as a form of payment to contractors, developers, and network operators. Purchase options include security, bug bounties, discounts on certification, and many more. And, future development of our blockchain enterprise model causes the utility of RFOX to increase.
But RFOX as a payment method is only the beginning. Our native coin also plays a starring role in our upcoming 100% onchain blockchain game. Plus, in-game items feed into a marketplace for non-fungible tokens (NFTs).
Within this marketplace, gamers can buy, sell, and trade digital representations of their in-game progress. The currency of choice within our ecosystem? You guessed it: RFOX coin.
You see, to compete with bitcoin, cryptocurrencies such as ours must prove their worth through fundamental utility. And in the context of portfolio diversity, exposure to a single digital asset goes against the grain.
In today’s global markets, governments are increasingly uncertain about how to properly handle their economic woes. Although ongoing efforts attempt to bandage the situation, history proves that nations can’t money-print their way out of long-term danger.
The risk of widespread currency devaluation continues to grow. Crushing debt and sluggish economic growth mean developed economies are more prone to hardship when the next recession grips the globe.
So, have bitcoin and other cryptocurrencies proven themselves as effective hedges against the next downturn. That’s hard to determine because digital assets have yet to live through one, which is part of what makes holding crypto so exciting. Those who can stomach the volatility gain the possibility of outsized gains for limited financial exposure.
To achieve portfolio diversification, prudent investors hold a combination of uncorrelated assets. Meaning, the movement of one asset accompanies a reverse movement in another. For example, when equity markets increase in value, the price of bonds tends to drop. At least in theory, when one asset class begins to decline, another will rise to make up the difference.
Given today’s global market conditions, a well-balanced portfolio requires assets outside of any single government’s control. And cryptocurrencies, including BTC, RFOX, and KMD, fit the bill quite nicely. When you have control over your crypto — essentially acting as your own bank — it’s challenging for an individual or government agency to steal it away.
Moreover, today’s investors are increasingly thirsty for above-average yields. Increased distrust for the government and a dreary long-term outlook for conventional asset classes is a clear-cut path to an uptick in risk tolerance.
Eventually, investors’ struggle to find high-performance asset classes leads them to discover cryptocurrencies. Now, the crypto markets are anything but immune to market cycles, with the current trend on a downward slide.
However, nothing lasts forever. When the crypto markets finally climb out of the valley, those who balanced their portfolio with a small allocation of crypto are set to reap outsized rewards.
Summing up, diversity is crucial for a portfolio’s survival during times of economic tension. And a categorically varied portfolio includes traditional financial instruments, precious metals, as well as digital assets. More specifically, cryptocurrencies such as our native coin.