If there’s one positive amid the coronavirus pandemic, it delivered huge discounts in the financial markets. Among them, surprisingly, was gold and silver — traditional safe havens during times of panic. With the assumption that there’s a safe haven somewhere out there, curious investors looked at the cryptocurrencies. But here too, we saw much red ink.
Although the blockchain market suffered devastation, in its context, the coronavirus effect wasn’t too bad. I’m not suggesting that losing 20% of your portfolio value is a good thing; however, it’s nothing we haven’t been accustomed to. If anything, bitcoin and the major altcoins seem like enticing discounts.
As such, a tiff sprouted between longtime gold advocate Peter Schiff and Morgan Creek Digital co-founder Anthony Pompliano. On Twitter, Pompliano wrote, “Someone check on @PeterSchiff…. His precious rocks are falling in value FAST! #MustNotBeASafeHavenAsset.” Of course, the implication was that Peter Schiff is old and that gold represents the asset of an irrelevant generation.
Personally, I don’t find blasting precious metals as particularly helpful for cryptocurrencies. Moreover, Pompliano contradicted his own insult. When responding to why virtual currencies fell under coronavirus pressure, he responded that “Zoom out and breathe. Life goes on and the intraday movements of any asset rarely matter :)”
Well, that’s the same argument that gold advocates can also use. Either way, the coronavirus-led panic has magnified the temptation for buying cryptocurrencies. But should you take the discount?
Cryptocurrencies Are Attractive but More Discounts May Be on the Way
Due to the incredible volatility of cryptocurrencies, I think it makes sense to advantage the present discount. However, I wouldn’t “load the boat,” as the saying goes. Keep the powder keg dry because I anticipate some more discounts along the way.
One of the reasons I say this is because cryptocurrencies represents a real-time barometer of international investing sentiment. It could also be an accurate predictor of what to expect in western markets. Bear in mind that most cryptocurrency engagement occur in Asia. With that region reeling, we have a sense of the appetite for risk-on investments; that is, not much.
Further, China’s factory activity data plunged to an all-time low due to the coronavirus. This implies that workers and managers collectively are losing – or will soon lose – much disposable income. After all, a company can’t pay its employees to stay at home forever. Therefore, this is a deflationary environment and may eventually pressure cryptocurrencies.
I’m a big proponent of the blockchain markets. But I’m also a realist. Here, cautious bullishness seems the prudent approach.