The Great Chase For Cash

Hey Jessquarantined

As the stock market continues to crash due to the effects of the coronavirus we're finally seen what cryptocurrency is made of as a hedge against traditional finance. Bitcoin was created after the 2008 financial crisis and has never been around at a time like this, some called it a safe store of value, others called it digital gold, a true deflationary asset.

So what happened as the stock market continued its downturn? 50 Billion has been taken off the entire cryptocurrency market over the last 2 days and coins are in a complete free fall. So was it the safe-haven asset we all thought it could be? The answer to that is a bit more complicated than that.

Isolated incident

I think cryptocurrency would have acted a lot differently if it was only a stock market crash where these fraudulent banking practices reached the end of their rope and eventually capitulated in one another and capital flight would need to find a store of value, but this, not the case.

A pandemic

We're in a unique time in human history with a global pandemic that has well over 7 billion possible hosts to jump around to and it's doing so at a rapid pace. We are providing the fuel for this virus to grow and it's culling the population.

In a bid to stop it quarantine is our only weapon and in doing so we shut down economic activity in almost every level from trade to production and this is hitting supply chains harder than ever. Since our supply chains are so heavily dependant on China it's hit the heart of where we get our goods and this is setting off a domino effect around the world.

People are chasing goods and services for their survival and in doing so they'll liquidate their easiest assets first to bulk up their cash reserves. Cryptocurrency and Stocks are the easiest to offload so they'll naturally be obliterated. As people run out of cash, they will lean on credit, once they run out of credit they start dumping bonds, their cars, homes and anything they can to remain liquid.

People want cash on hand to be able to buy things they feel they will need and stockpile things like good and cleaning supplies.

Image Source - fool.com

The cash slosh

As cash is removed from assets, asset prices will continue to tank until it finds their relative bottom, I think stocks are still way overpriced and will have some way down to go, the same with homes. I think people will be looking to sell second and holiday property as the squeezes hit and cash is needed. I think as unemployment rises and businesses close due to this, we will see a bigger need for cash.

The US federal reserve, Peoples Bank of China, European Central bank will also likely be printing money as they have never done before driving up inflation and as more money chases very few goods and services prices will go up.

People will look to store cash in alternative means again and capital will then flow back into assets as people want to store their value in a better way.

The big lesson for cryptocurrency

I think this also exposes a massive issue in cryptocurrency that we have yet to address and that's being able to cut out the fiat middleman and go direct. We're not yet able to buy directly with our crypto and that's why people feel the need to liquidate even against their best interests. We saw how ETH had an hour backlog because people wanted to dump and it was costing them a tonne in fees, but they wanted to get out to get cash.

I personally don't know where the bottom will be but I'll continue to pick up BTC as I always have, nothing really changes for me.

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