Why Should Ordinary People Allocate a Few Digital Assets?

On July 28, Aurora, Vice President of ZB Group, attended the financial innovation forum of the First Taiwan Blockchain Week. When talking about impact of trade conflicts between China and the United States, Japan and South Korea on digital currencies, Aurora said, “It may trigger investor concerns about tax increases, interest rate cuts and inflation. Risk aversion will prompt more investors to invest their money in digital currencies field. ” In terms of asset allocation that many people care about, Aurora believes that there are three advantages to allocate digital assets. One is to hedge macroeconomic risks; The second is to control the property ownership in own hands through the decentralized structure of blockchain; Third, there is still considerable room for growth and appreciation of digital assets.

For the three advantages Aurora said, I think there is a certain reference value. So, I will take Bitcoin as an example and briefly analyze it.

Hedge macroeconomic risks

Bitcoin is the most reliable hedge against Venezuela’s hyperinflation.

Trade Economics stated that the central bank’s statistics showed that the Venezuelan economy shrank over twenty-two percent (22.5%) at the end of 2018 and then recently, over seventeen and a half percent (17.6%). The other sectors shrank twenty-two percent (22%), after contracting sixteen percent (16.2%) in the second quarter of 2018, mostly due to construction (-67.9 percent vs -47.7 percent), finance & insurance (-52.5 percent vs -35.8 percent), manufacturing (-46.1 percent vs -30.3 percent), trade (-42.3 percent vs -29.2 percent), transport & storage (-30.8 percent vs -23.1 percent), real state (-13 percent vs -10.9 percent) and utilities (-16.2 percent vs -15.6 percent).

In the beginning, the Venezuelans are sticking to their fiat currency in order to try and save what’s left of their economy. So the Banco Central de Venezuela has printed new banknotes of 10,000, 20,000 and 50,000 bolivar denominations. But economic conditions in Venezuela have continued to spiral out of control as political clashes escalate. New banknotes depreciate.

When a state manipulated currency decreases in value people need to look elsewhere in order to survive. Bitcoin would be the savior in this instance and more Venezuelans are turning towards it.

Why Should Ordinary People Allocate a Few Digital Assets?

Volumes have surged to all-time highs of over 45 billion as Bitcoin surged to new highs for fifteen months.

According to Reuters, respondents believe that the Fed’s interest rate cut of 25 basis points in July is almost a foregone conclusion as the risk of economic conflict between China and the United States is rising. It is expected to drop again later this year.

The Fed’s interest rate is expected to have undergone a major reversal this year, shifting from the previously expected steady tightening path to a stable early in the year to a series of interest rate cuts. In fact, just a month ago, the Fed also expected to maintain its policy for the time being, and will relax its policy next year. But since then, policymakers have become increasingly concerned about the impact of trade conflicts on already slowing economic growth and sluggish inflation.

“We don’t think this is the beginning of a complete quantitative easing cycle, which is to provide a bit of easing to offset the negative impact of the trade,” said Royal Bank of Canada senior analyst Josh Nye.

Paul La Monica, CNN correspondent, said, “This is good news for both bitcoin and gold, both of which are considered alternative currencies. When central banks take action to reduce the value of government-backed currencies, they should rise.”

Control the property ownership in own hands through the decentralized structure of blockchain

Tone Vays, Trader and crypto analyst, said,“Bitcoin might be the greatest store of value in the history of the world. Its ‘unconfiscatability’ property is unmatched. That is its true store of value, as gold is confiscatable and all other assets even easier.”

 Changpeng Zhao, CEO of Binance, said,“Bitcoin is not gold. Gold is heavy, hard to carry around. Bitcoin is better.”

If you put Bitcoin in a cryptocurrency exchange or an encrypted wallet, as long as you don’t buy/sell or actively transfer it to others, these cryptocurrencies are yours.

There is still considerable room for growth and appreciation of digital assets

Naeem Aslam, chief market analyst at ThinkMarkets, also said that Bitcoin broke through five digits a month ago, when the main price point was $20,000 and $50,000. Once it reached $20,000, Bitcoin price would quickly exceed this. At the highest level in history, it will turn to $50,000. On this basis, it will continue to break through $50,000 and rise to $100,000.

Dr. Julian Hosp, one of the leading analysts in the field of cryptocurrency, said that Bitcoin price could reach $100,000 by 2020. Anthony Pompliano, co-founder of Morgan Creek, also said in an earlier interview that by the end of 2021, the value of Bitcoin would reach $100,000.

Dan Morehead, CEO of Pantera Capital, is still optimistic that Bitcoin price will reach $42,000 by the end of 2019, and if Bitcoin’s historical compound annual growth rate continues, it may reach $356,000 in 2021.

For some digital currency advocates, digital assets show the value of transforming the democratic system, redefining the symbols of the market, and solving a series of social trust problems; but for most ordinary people, no one is clear know what the future of digital currency looks like, but we know that the underlying technology blockchain is changing the way the world handles money. Ordinary people can’t grasp the real technological frontier, and we don’t have the funds and ability to really infiltrate the industry. What we can do is to use probability to resolve risks and wait for the leap after the bubble. We have to join in advance instead of waiting until everything is clear.

Disclaimer: The article is intended for informational purposes only and should not to be considered as investment advice.

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