Utility Coins is Good as a Short Term Hedge but not a Safe Haven yet.
A lot of people have been mentioning that utility coins in general are a great safe haven from long term economic uncertainty even so far as comparing it with Gold, but are your investments truly safe with utility coins during recession? We took a look from an article in Cointelegraph “Bitcoin is a risky digital copper, it’s not Gold” and wondered if this is true?
We all have seen the crazy returns Bitcoin is currently recording within just 10 years, going on from touching the $1 mark in April 2011 to reaching its all-time peak of $65.000 in April 2021. Even Though a lot people might see this as the holy grail of investments, a lot of people have lost money due to its volatility.
Speaking with CNBC Squawk Box Europe, Jeff Currie, the global head of commodities research at Goldman Sachs, dismissed the comparison of Bitcoins to Gold, citing that it is more of a “risk — on” asset like copper.
“Digital currencies are not substitutes for gold. If anything, they would be a substitute for copper, they are pro-risk, risk-on assets. They are a substitute for risk-on inflation hedges, not risk-off inflation hedges”
According to his points, we feel that Utility coins in general are a good hedge to consider because it works well in a situation where people’s appetite for risk is high. As it is a risky asset, most of the bitcoin transactions that occur around the world are purely trading whether it is through individuals or financial institutions. Due to this reason Bitcoin suffers from pure speculation and volatility. It is not suitable for an economy going through a recession as most people will look for safe haven rather than to do speculation.
“Gold hedges bad inflation, where supply is being curtailed, which is … focused on the shortages on chips, commodities and other types of input raw materials. And you would want to use gold as that hedge.”
According to Currie, Bitcoin cannot yet compete with Gold due its volatility issues. We feel that it is a good hedge for short term uncertainty in the market for countries suffering a money supply inflation for ex Zimbabwe. Where people start to lose faith in their country’s own currency and digital currency will safeguard you from that condition but it is a bad hedge for conditions like the housing market crash in 2008, where most people lose jobs and dont have the funds to make speculative risk on their investments.
“Commodities are spot-assets that do not depend on forward growth rates, but on the level of demand relative to the level of supply today.”
We feel that this point from Jeff Currie sums up Bitcoin’s condition really well. Currently as most of the transactions in bitcoin are trading, the asset value depends on how much people are willing to pay for the digital currencies. Commodities and Utility coins are quite similar with their supply being limited, and as I have mentioned their value depends on the demand for them, hence this is why utility coins are treated as a commodity for now. But the only difference between commodities and Utility coins, is that commodities are physical assets that have a use, for example Gold are made into jewelleries, Copper are used in cabling, so their demand does not purely depend on trading.
We in Nagaya Technologies agree with what Jeff Currie has to say and believe that Bitcoin and Utility coins in general are not yet ready to be compared as a safe haven like Gold. Hence why we decided to take the growth of Utility coins and stability of a safe haven like Gold to create the world’s first hybrid cryptocurrency.
Interested to know more about Nagaya Technologies, you can find out more at www.nagaya.io
Or you can talk to us at t.me/nagayaofficial