Cryptocurrencies Safe Haven Assets As Global Economy Slows

As concerns of a global economic slowdown before the end of 2019 heighten, cryptocurrencies will increasingly be viewed as safe havens for investors throughout the year. Demand for cryptocurrencies such as bitcoin and ethereum is continually increasing, fuelled by the escalating dissatisfaction with fiat money and the present banking infrastructures.

Indeed, economic indicators tracked by the Oragnisation for Economic Co-operation and Development have diminished since the beginning of 2018, indicating decelerated expansion within the next six to nine months. Furthermore, the broader global expansion that got underway around two years ago has levelled off and become less even, according to the International Monetary Fund.

Therefore, the number of investment tailwinds to take into account in 2019 is mounting. These include the U.S.-China trade war, global political uncertainties, including Brexit, mounting interest rates and a degree of complacency in financial markets.

Being the world’s largest economy, the United States has substantial influence on both Asian and European economies. Therefore, should the U.S. stock market plummet as we saw recently, offsetting all of this year’s gains during a massive sell-off, global markets are, of course, susceptible too.

As such, within this environment, it can be reasonably argued that digital currencies will be increasingly regarded as safe havens for investors not just in 2019, but also further in the future. During the downside of the economy, cryptocurrencies will likely be seen by investors as a secure way of storing wealth, in the same way as gold.

Indeed, many analysts are of the opinion that as cryptocurrencies mature and evolve as a major asset class, they will show increased stability like gold and other safe haven assets. There are a number of reasons why cryptocurrencies will be safe havens for investors.

Take bitcoin as an example. There is a fixed supply of 21 million bitcoins, which is why many economists believe it is more coveted than gold. That said, unlike gold, there are no concerns over a ‘digital gold rush’ with Bitcoin. There is no undiscovered supply of this digital currency which may lead to a price crash due to excessive supply.

In addition, cryptocurrencies won’t face any deterioration that may lessen their value; and as mass adoption of digital currencies takes hold on a global scale, future demand is a certainty. Furthermore, blockchain, the technology that underpins cryptocurrencies, has significant advantages over traditional funding and transaction platforms.

As such, this mainstream adoption will gain considerable pace in 2019 as the world, particularly business, recognizes and implements further uses for crypto and blockchain.

Since adopting ethereum’s blockchain for use within our art business, it has allowed us to generate a system to use artworks as a precise store of value; which, in essence, becomes a cryptocurrency wallet. Moreover, using this blockchain technology resolves issues surrounding authenticity and origin, which, naturally, are crucial in the art world.

Of course, the world is still a long way away from cryptocurrencies taking over traditional currencies or gold as the favored safe haven assets. However, as the world gradually moves away from fiat money to digital, and as cryptocurrency adoption escalates, there is no doubt digital currencies will be deep-seated within the bracket of safe haven assets within the next 10 years.

Ian McLeod is co-director of Thomas Crown Art, a leading global art-tech agency.