Posted 5 months ago | Ben Armstrong
Alternative Assets Are Doing Well in the Post COVID-19 Wonderland
The political reaction pandemic has destroyed the global economy. With money losing value and old ways of wealth management seeming questionable, people are turning to alternative assets – and many large investors are no longer happy to hold paper gold.
The implications for crypto in this investment climate are positive – although the big push up in token prices may take some time to materialize.
When the US stock market was smashed down in the spring, it was the opportunity for many traders to start buying in large quantities. Alongside with easier methods of mobile trading, more and more young individuals are jamming their cash into the stock market.
The RobinHood Rush
In a recent article on Investor’s Business Daily, Matt Krantz stated,
“An army of mostly young, highly engaged beginning investors looking to outmaneuver the pros. Online brokers are reporting a surge of new accounts and trading activity from individual investors and traders — many with little or no experience but an intense willingness to learn.”
Many of them are betting on the economic recovery from COVID-19, and aiming to score big bucks:
“The trend could put more Americans on a path to greater wealth and financial security...it remains to be seen if the beginning investors will stick around for the long haul”
The other side of this trend is that small traders aren't generally the smartest money in the market – and large holders of equities (think – billionaires) are cashing out in large amounts.
The Golden Angle
On the other side of the world, the people of Turkey take a slightly more traditional approach when it comes to managing their wealth during the global pandemic as its currency, the Lira once again, entering free fall just like 2018.
In an interview with Reuters, the deputy head of one of the Istanbul gold shop associations, Mehmet Ali Yildirimturk, shared that there are currently as many as 5000 tonnes of gold in the possession of Turkish and this figure has not accounted for the recent boom in imports.
Totaling up to $310 billion, it is currently 40% of Turkey's GDP.
This excess in gold demand has created pressure on the central bank.
According to the WSJ,
“The Turkish treasury regularly issues gold bonds while banks have opened gold accounts and experimented with gold credit cards and gold ATMs.”
They even took countermeasures by jacking up the gold sales tax from 0.2% to 1%. But this move only pushed people away from the bank, and into the Grand Bazaar and “gray market” instead.
The Turkish aren't alone in their lust for physical gold.
A Need for Alternatives
Large entities on the COMEX have been buying up gold at record prices – and taking physical delivery of the metal. The amount of gold flowing into the USA to meet the demand from these purchases has hit record levels – which may not be a great sign for the spring-green RobinHood traders.
So far – crypto has been doing well – but most major tokens are still a long way from the highs of late 2017 and early 2018.
The reason for this relative underperformance in the alternative asset space is likely one of reputation – as many large investors may be willing to pile into gold – but Bitcoin could still seem a little exotic.
Of course, Bitcoin and crypto in general have major advantages over physical assets – gold included. Over the course of the next few years – these advantages will likely be appreciated on a wider scale – and crypto prices will respond accordingly.
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