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the Sanctuary You’re Seeking for

2020.06.12

With global markets looking bleak, and the effects of the coronavirus likely to get worse before they improve, the search for safe haven assets has intensified. Assets that have traditionally held this status, such as gold, have not performed well so far, with central banks selling off gold reserves with dampening prices. It was a similar story during the 2008 financial crisis, when gold slumped initially, before embarking on a record-breaking rally six months later.

When the market turns red and cryptos crash, a flight to safe haven assets is inevitable. So far the greatest beneficiaries of this trend have been stablecoins, whose issuance and trade volume have ballooned as the coronavirus has wreaked havoc on the global economy. The fact that so many traders have chosen to stay in stablecoins rather than temporarily exit the cryptoconomy altogether could be bullish for bitcoin, suggesting that the current downturn is seen as a buying opportunity rather than evidence that cryptocurrencies are fundamentally broken. In the meantime, however, stablecoins are attracting scrutiny for their inability to serve as a store of value.

But there’s more to stablecoin stability than an inability to maintain a fixed peg against fiat currencies: there’s also the performance of the underlying currencies themselves. As part of the team behind Saga’s SGA, a crypto asset backed by the IMF’s SDR basket of currencies, Ido Sadeh Man knows more than most about the fluctuation of fiat, and the dangers of entrusting your net worth to any single nation’s currency.

All fiat currencies suffer from volatility when measured against one another, a fact which can be seen in the against USD over the past few weeks. The dollar is down, and this despite SDR including a 42% weighting of USD. Were it not included in the Special Drawing Reserve, SDR’s gains against USD would be greater still. The US dollar is far less volatile than the currencies of smaller nation states. But if USD can be buffeted by freak global events, like the ones that have unfolded over the past two months, what hope for other fiat currencies, and their crypto counterparts – stablecoins – of retaining value?

作者 : Collin Brown