Cryptocurrencies vs. traditional financial markets
Effectively managing assets and providing safety in times of economic decline is vital for any financial service provider. For hundreds of years these providers relied on precious metals, mostly gold, to preserve the value of assets during economic downturns. It is still widely believed that gold can withstand and hedge the risks caused by economic uncertainty and political upheaval.
The major advantage cryptocurrencies have that no other asset class has ever had is decentralisation.
Yet there is a risk inherent in physical asset classes like gold. In times of unrest, these asset classes can break down because they are still attached to physical locations like land or bank vaults.
By contrast, cryptocurrencies benefit from being decentralised - they are free from any physical location. There are no known ways to stop blockchain based currencies from distributing information updates, whatever the political circumstances. This means assets are kept safe around the world, around the clock.
Bitcoin and other cryptocurrencies are gaining increased interest from investors as their immense potential becomes clear. On the one hand, they provide the hedge investors need. On the other hand, they’re currently also a great short-term trading resource because of the volatility in price. This makes them high-risk, short-term investments with high-yield potential, something every trader is looking for. And they have the capability to hedge traditional financial derivatives. This unique combination is what makes cryptocurrencies a true phenomenon.