With increasing uncertainty entering the market place and the FAANG stocks facing substantial setbacks, investors and private individuals alike are searching for ways to store value and protect it from inflation and collapse.
At the same time, as fear grows in the market, the options for protecting value are relatively limited.
Buckets that people store value in:
Real Estate: $220T
Then someone figured out how to make an Internet-native digital scarcity, thus:
In a post-industrial Internet age, do we really think it'll remain a thimble not a bucket?
— Willy Woo (@woonomic) January 21, 2019
One potential option for storing wealth is to simply hold cash — whether in money market accounts or in a mattress. Cash has, at various times, been king. Value can be stored because the paper currency has an agreed-upon value that can be accessed and used rapidly.
However, perhaps more than any other, storing value in fiat currencies has fallen on hard times. Risks with central banks, burgeoning national debt around the world, and various levels of inflation make storing money in the mattress a bit asinine.
Nothing could be more depressing than discovering, like post-WWI Germans, that your $1M dollars could purchase you a single loaf of bread — and this is a genuine potential in the current global financial climate. One only needs to look back to the crisis in 2008-2009, when the world’s financial stability rested on the bailout of the Greek economy, to know that we’re in a precarious position.
Some would argue that the best way to store value would be in stocks or bonds. These instruments provide a methodology for attaching money to the success or failure of a company.
To be fair, this has been a common means of value protection for the past three generations. As businesses grow and mature, the value can be not only stored but increased.
However, with failures left and right — and the ever-changing landscape of the stock market — a substantial number of investors are moving out of this space in search of other options.
All That Glitters
The next potential for protecting wealth from market chaos is in gold or precious metals. These retain value because of their scarcity and industrial uses and are generally less affected by fluctuations in the business world.
Gold has been the instrument of choice for this function and will likely continue to be a major factor in how investors and individuals protect their wealth from market volatility. Gold holdings help investors hedge against inflation and market shifts.
However, the major complaint about gold is the lack of liquidity. Walk into a local convenience store with a bar of gold try to buy a Perrier. Not only will you find a bewildered clerk, but you’ll be in grave danger of being mugged. Fractional gold coins produced by government mints may help mitigate personal liquidity concerns in the event of a global fiat currency collapse.
Rickety Real Estate
The fourth legacy option for protecting value is real estate.
It’s been a good run for the housing boom. However, most homeowners lost a substantial amount of equity in the housing crisis in 2008 — proving that values for real estate can tank, just like all the rest.
What’s more, the barrier for entry is extreme — meaning that most investors must have some type of financing in order to move into the market. This means that many investors are forced to carry debt — a sure-fire way to destroy wealth.
A final solution has come to fruition in the past decade. Satoshi Nakamoto gave the world a way to maintain genuine scarcity coupled with simple liquidity in the creation of Bitcoin.
By allowing users protection and access while, at the same time, removing the need for third-party trust systems, Bitcoin creates a liquid and safe store of value.
The internet age is booming and technology-based solutions are growing more and more commonplace. Fifteen years ago, most consumers would have been concerned about purchasing anything online. Now, Amazon has made Jeff Bezos the richest man on earth.
Bitcoin is simply a new and innovative store-of-value solution for the digital age. Based on consensus and protected from inflation like gold, but also liquid and easily transferrable like fiat, it presents the best possible solution to the greatest financial need of this generation. Certainly, the Bitcoin bucket won’t stay thimble-sized — it must grow.
Think Bitcoin is the best solution for protecting wealth, or are there better and easier ways to store value? Let us know in the comments below!
Images courtesy of Twitter, Shutterstock.