Are digital assets in the pandemic era an “airbag” for investors?

In a period of general downturn, investors are looking for the bestways to save the value of your assets. One of the areas of diversification is the cryptocurrency sector. However, how well can digital assets save capital in this situation? We asked the analyst of the financial company 8848 Invest Alexander Kopytov about this.

Colossal Impact on the World Economy

According to the expert, the current situation is very interesting from the point of view of market dynamics, since a lot of events occur in a unit of time. For the investorYou have to not only monitor the spread of the virus, but also study which sectors of the economy are in decline. In parallel, against this background, market volatility has also increased significantly.  

At the same time, the majority of classic and cryptocurrency participants believe in the speedy restoration of all chains and, accordingly, a V-shaped economic recovery. 

In terms of the spread of the virus, we are nowWe see a repetition of the Chinese scenario in many countries. For example, Italy has already reached a horizontal line and will continue to decline, while the USA is approaching a peak. However, then a secondary multiplier effect will occur: first the closed bookstore suffers, the next stage is the publisher, and then the authors and translators. It is quite difficult to evaluate it, which is why the markets are now “jumping” so much. trying to incorporate future changes into current quotes. 

Alexander Kopytov believes that  the subsequent effect will be not only in a series of bankruptcies, but also in the redistribution of many markets: 

“Most likely, over the coming years we will see changes comparable to the consequences of World War II. Then, let us remember, the IMF and the UN appeared, and the US dollar became a reserve currency.”

Global cleaning

There are many distortions currently appearing,that have accumulated over decades, such as inflated stock markets. Since its peak in 2008, the S&P index has grown by 100%, while the American economy has gained 20% since then.  The current decline has returned prices only to the levels of 2017. 

The same goes for real estate markets.The average apartment in London in 2000 cost £140 thousand, at the peak of 2008 £300 thousand, and now it costs £500 thousand. The picture is similar with real estate in China or America. It's all because of the huge printing press initiated by the US Federal Reserve. 

This also applies to the corporate sector –many companies were engaged in “eating” shareholders' capital or capturing market share without even thinking about generating profits. Now everything will fall into place, but first we will have to go through a crisis, which will become a means of getting rid of unnecessary participants in the economy.

New order

The world economy will have a redistribution of spheres of influence, the organization of new alliances and blocs. It is even possible to change the leaders of the global economy. China was the first to emerge from the epidemic and is already starting production.

An equally important issue is inflation.There is no consensus yet on further monetary measures. However, a new portion of liquidity from the Federal Reserve in the amount of $2 trillion was released into the market at a speed 47 times faster than previous QE. This could cause dollar inflation, which the world has long forgotten, accelerating into double digits.

And now it's time to think about what will happenan alternative in such a situation? We do not know what will become the new engine of the world economy and the key parameter of the coming technological revolution. It can be advanced pharmaceuticals, drones, artificial intelligence, the Internet of things, or something else. One thing is clear, the future economy may have new growth centers, regulators, and even a reserve currency.

It is very likely that the market will increase adoptionprogressive instrument – cryptocurrencies, including them in the new world order. It will be quite difficult for an investor to choose a specific currency. It is likely that these will be new digital assets developed jointly with major financial institutions. Although currently available projects such as TON and Libra may also be suitable.

Regarding the current situation and the immediate futurefuture, then most investors consider a rapid recovery as the base scenario and are ready to buy almost everything. Stocks, commodities, and cryptocurrencies are now steadily rising from current lows. The depth of the fall of most digital assets is comparable to other markets – about 50%. Therefore, the potential profit for a patient investor can be 100%. The only question is how long you have to wait.

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