Richard de Sousa, CEO, AltCoinTrader
The present financial uncertainty has seen inventory markets expertise unprecedented volatility, with many traders on the lookout for secure havens for his or her funds till the storm created by the COVID-19 pandemic dies down.
Rising market economies have been notably onerous hit as traders retreat into the relative security of the key currencies, together with the greenback and euro. This has seen the rand drop to historic lows in opposition to most key currencies.
“This isn’t, nevertheless, a brand new phenomenon and it was solely a matter of time earlier than one disaster or one other triggered a big drop within the foreign money,” explains AltCoinTrader CEO Richard de Sousa. “The mixture of presidency coverage, corruption and aggressive political rhetoric have created a local weather of financial uncertainty within the nation and that is one thing that traders don’t take kindly to.”
The online results of this was the collection of downgrades from the worldwide scores businesses, with Moody’s and Fitch simply the most recent to downgrade the nation’s standing.
“With all this uncertainty and no answer in sight from authorities, South African traders have been on the lookout for any method to cushion themselves from the inevitable drop within the worth of the rand, with probably the most viable choices being asset lessons that carry a world worth similar to gold and Bitcoin,” he explains.
He provides that whereas different rising currencies are more likely to recuperate from the shock of COVID-19, it’s unlikely that the rand will, given the inherent weaknesses within the economic system.
Gold and Bitcoin weren’t resistant to the large selloff in the midst of March, with the worth of gold dropping virtually $200 in just some days. It recovered shortly and is presently buying and selling across the similar worth that it was originally of March.
“The worth of gold as a rand hedge is properly established. For traders trying to make sure that their investments are protected it permits them to retain the greenback worth of their investments, whereas the rand worth of investments in gold have reached all-time highs. So when fairness investments are shedding worth, gold has confirmed its price,” De Sousa feedback. “The strikes by central banks to loosen financial coverage is barely going to strengthen this development.”
He provides that as those that can are shifting their investments offshore, this has a knock-on impact on the native economic system, with much less capital out there to drive development and a detrimental influence on the rand creating one thing of a vicious cycle.
Bitcoin has, prior to now 5 years, risen to prominence as a substitute secure haven from the vagaries of world foreign money markets. It additionally noticed its value drop in the midst of final month, however De Sousa says this short-term volatility is one thing that’s inherent to the Bitcoin market.
“Bitcoin has all the time skilled short-term volatility, but it surely has outperformed each different asset class for every of the final 5 years. Those who perceive Bitcoin and the way the market strikes have a mature view, and by retaining their Bitcoin holdings by the volatility come up smiling on the opposite finish. A sign that traders nonetheless place confidence in Bitcoin is that buying and selling volumes are increased than traditional and we are actually seeing the worth trending upwards.”
The power of Bitcoin to retain worth over the long run is intrinsically linked to the expansion of the underlying blockchain know-how in enterprise functions. Though not on the similar degree of hype seen two years in the past, De Sousa says there may be nonetheless robust curiosity in making the most of the inherent strengths of blockchain to drive progressive new enterprise fashions, particularly in functions linked to the fourth industrial revolution.
“The opposite issue stays regulation. As soon as governments begin to successfully regulate the way in which new shops of worth are used, I count on that what was as soon as seen as a fringe funding alternative will supplant the normal markets,” he says.
