Financial stability is an ever-relevant issue in almost any part of the world, regardless of how much money individuals, families or whole classes poses. Today, like in many other times in history when the domain of the financial and economic landscape is changing, the same stability seems very lacking.
What is more, its long-term potential also seems to be weighing year after year as humanity steps deeper into the 21st century. Today, there is a strong sense that in many nations, especially Western ones, the ability to save and generate funds is dropping, the possibility for the first time since World War 2.
There is a worrying trend there and lessons of the past detail how these setups easily slide into discontent and even massive strife on a level of full-on wars. But, with all that in mind, there is also the upside of the same changes – the alternatives for savings are expanding and becoming more diverse.
Here, digital currencies, especially big ones like bitcoin, are one of the most recent introductions, but still, a factor that has enormous potential as a savings mechanism. Of course, many would see this statement as complete insanity, especially if they come from the traditional financial circles. But, in spite of them, there is a certainty that these investment options will become more and more relevant as the years go by.
Raoul Pal Perspective
The viability of not just bitcoin and other crypto-assets is seemingly ever-growing in the modern world and this is something a former Goldman Sachs executive has to conclude as well. The executive is Raoul Pal, who used to work for one of the biggest financial firms in the world. Now, he runs another company called Real Vision, but he also decided to share his take on the cryptocurrency field as a means to attain a long-term investment.
He first echoed some previous comments by financial advisors that current asset classes show not much promise for the millennial generation, especially when it comes to 10 or 20 years in the future. Equities, for example, are currently close to all-time-highs and provide relatively little potential or profit. In that sense, the modern world has plenty of parallels with the era of the late 1930s. A decade before that, the financial crisis brought about by the crash of the stock exchange brought interest rates to almost zero.
Plenty of money had been printed and the buying of financial assets took the asset prices higher. Today, Pal believes that bonds are not much better as they provide almost zero yields and even negative ones in some cases. Lastly, the real estate investment option is not faring any better thanks to the fact that the prices are also sky-high ad this will continue. With such tremendous investment needed, the younger generations simply do not have the funds to invest in real estate.
Here as well, the modern world provides new alternatives like grouping in with smaller investors to get a particular real estate or even crowdfunding a real estate development so that money can be generated once it is completed and sold to the residents or users. However, these options are not commonplace and demand a long-time interest in real estate and these new mechanisms of investing in them. Here is the spot where cryptocurrencies come in.
With all these attractive options at their disposal, where would a millennial individual invest their money and save for the future? Among other options they are constantly on the lookout, the same individuals had to at least be mindful of cryptocurrencies.
Others are beyond mindful and these are already investing in the same area. Pal, like many others, believes that buying bitcoin and cryptocurrencies makes complete sense of the millennial and Y generations. The opportunity to be wrong is still more than the present, but the young individuals of today would start doing it early and gradually make up all of the losses as they load up on other digital assets.
In his view, buying bitcoin today is like getting equities and bonds in 1982, before the inflation drove their price up. With enough cryptocurrencies and enough different blockchain tokens in their possession, both altcoins and the major players, a person theoretically would have a saving account in crypto alone.
There is another benefit that the younger generation has – the notion of buying digital currencies is not foreign to them. The Baby Boomer generation grew up and spent most of their working life is oriented towards buying bonds, stocks and other traditional vehicles that provided a strong return in the very long run.
For the young generation, the promise of strong returns is not there even in 20 years. At the same time, they grew up with video games and esports, the internet and other digital-native ventures that blend perfectly with cryptocurrencies. Not only that but they also have the skills to open digital wallets, complete transactions and do whatever is needed to get the same crypto funds.
Also, nothing is like a central authority stopping them from being a single USD worth of bitcoin every two weeks. This means that there are no barriers to them investing their extra income into cryptocurrencies in ever-larger numbers.
Fears of Recession
Lastly, there is a single element that plays a big hand in all of this – possible recession. With Brexit and the general instability of the European banks, the coming year could trigger something like the US 2008/9 crisis.
If that happens, chances are that funds are going to go into crypto in the hope of finding protection from the crumbling traditional market. If and when this happens, the price will not climb gradually, but shoot up fast and hand like it showed it can.
This will render it useless to small investors and those who already have it will be tempted to sell, but also risk once again ending up with the fragile fiat currency. This makes bitcoin and other cryptocurrencies still an interesting long-term investment option, but not something any financial advisor, even those from the crypto domain, would recommend as a sole solution.