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Crypto: safe harbour or stormy sea?

We may not have quite banished the spectre of coronavirus, but things are certainly looking up compared to a couple of months ago. Production cuts have been agreed on by the OPEC+ nations and global equities have managed to drag themselves back into familiar territory. And amid all this, digital assets have also been able to recover a lot of lost ground (without central bank help), though some have fared better than others. We will remember how the cryptocurrency market surprised everyone when it lost $50 billion in less than a week in early March. Many had been convinced that crypto was the next-generation haven asset and so when it fell more or less in lockstep with stocks and oil, the confusion was palpable. But does crypto’s coronavirus decline mean it will never challenge gold for preferred safe harbour status?

 

Not necessarily. It’s still too early to say how cryptocurrencies will behave in future crises. As the economy continues to digitise, crypto will have more and more real-world applications and prices should eventually begin to stabilise somewhat. The problem crypto had during this Black Swan event is that it is far too volatile even at the best of times and thus not really a natural choice for investors thinking about safety first. Despite all that, there were some coins that seriously outperformed both the wider markets and even the flagship cryptocurrency, Bitcoin.

Privacy first

When it comes to beating the coronavirus downturn, user anonymity and general privacy have been huge deciding factors for crypto assets. Just look at the two biggest privacy-focused coins on the market, Monero and Zcash. Both have outperformed both the wider economy and their fellow cryptocurrencies by some margin. Monero, for instance, is up over 30% YTD, while Zcash has managed to gain close to 70% over the same period.

HedgeTrade CEO and founder David Waslen has also noted this trend, expressing the following opinion: “With regulations on crypto tightening and people feeling financial privacy (and security) is a right, we see a corresponding interest in privacy coins, even more so since Black Thursday.” It’s only natural that in a climate of uncertainty and change, people are beginning to feel concerned about anonymity in the digital space. As such, the popularity of these types of projects are likely to grow. The only potential barrier to their continued success could be government moves to outlaw them as more and more countries bring in coherent crypto regulation of their own.

Utility

Even amongst the more mainstream projects, there have been coins that have bettered Bitcoin’s performance during this recent crisis. Ethereum, for example, is up more than 120% from its March lows, while BTC has only managed to recover around 90% over the same period. It has been suggested that this could be due to ETH’s technological edge over Bitcoin. Ethereum’s smart contract facility offers much greater functionality than BTC, whose biggest advantage is store of value.

It’s no coincidence that most new altcoin projects choose Ethereum’s blockchain architecture over competing technologies. And once the new PoS Ethereum 2.0 goes live, the number 2 coin by market cap could well see its popularity grow even further. Another smart contract-based coin that has managed to rise by more than 100% from its local minimum is Chainlink. This self-proclaimed decentralised oracle system enhances smart contracts with the real-time data needed to decide whether a contract has been fulfilled. For many, the future of crypto involves the meshing of these kinds of systems to provide real services to ordinary people.

The verdict?

While some may have been shocked that crypto wasn’t able to prove its safe haven pedigree during this Black Swan event, it was hardly realistic to expect the fledgling asset class – which is still characterized by uncommonly high volatility – to be able to satisfy the risk appetite of would-be hedgers just yet. It’s also worth noting that much of the selling seen in the crypto sphere wasn’t so much people swearing off cryptocurrencies as much as it was a symptom of the liquidity squeeze provoked by the coronavirus fallout. That said, clearly many fund managers and individual investors would have looked at the volatility of digital assets and preferred more traditional haven assets such as gold. But by the time the next crisis arrives, things could be very different. As privacy concerns grow and crypto tech really begins to show the world what it is capable of, you can be sure that millennial and Gen Z investors will prefer digital assets over some lump of metal.

In the meantime, however, there are still plenty of opportunities on the crypto market for both buy and hold investors and active traders alike. Before you can get a piece of the action, though, you’ll need a secure and reliable method of purchasing and storing your crypto. Whether you’re a total newbie or crypto veteran, the StormGain platform is a one-stop shop for all your cryptocurrency needs. With StormGain, you can buy with fiat, exchange, and store up to six different currencies in your very own dedicated online wallets. A user-friendly modern platform, offering over 20 of the biggest cryptocurrency pairs, allows you to multiply your gains several times over. Even if you just plan on holding for a rainy day or until crypto really does become a bona fide safe harbour, not only will StormGain not charge you an account maintenance fee, it will even pay you 10% on all your deposits up to $50,000. There really has never been a better time to register a StormGain account. Sign up for StormGain now and start making money from Day 1!

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