Experts explained why digital currencies have secured the status of defensive assets and whether they can effectively prevent the depreciation of funds
Almost half of unqualified investors in Russia (46%) believe that cryptocurrency will become an effective defensive asset in the future. This is indicated by the results of a survey conducted by Investing.com among Russian investors, Izvestia reports. The survey also showed that more than half of the portfolio of unqualified investors in Russia is made up of alternative assets (cryptocurrencies, real estate, works of art and antiques).
On November 25, the Bank of Russia estimated the annual volume of transactions of Russians with digital assets at $ 5 billion (about 350 billion rubles). The Central Bank also noted that Russian users are among the most active participants in the digital currency market. Russia is among the leaders in the number of visits to digital currency exchanges.
Topplabs.org experts explained whether cryptocurrencies can be called an effective defensive asset and how to invest in digital assets correctly to protect capital from inflation.
It is impossible to speak with a 100% guarantee that cryptocurrencies are effective protection against inflation, says Artem Deev, head of the analytical department at AMarkets. According to him, over the past two years, there has been a situation in which traditional financial markets are “sagging” due to a pandemic, and investors are looking for opportunities for investments with high returns.
“The distribution of 'helicopter' money to the population in the US and Europe has stimulated the process of an inflow of funds from private investors into the digital asset market. At the same time, volatility has not gone anywhere, it has not decreased, ”the analyst recalled.
Bitcoin, Ethereum and other digital assets, despite their growing popularity, can both sharply rise in price on positive news, and no less sharply fall when negative events appear, Deyev warned. According to him, it is also difficult to make any forecasts for cryptocurrencies due to the increased regulation of the crypto market by the largest states.
At all times, gold was considered the main protective asset against inflation, the analyst said. He believes that so far nothing has changed in this regard, since with high prospects for the depreciation of any paper assets, only precious metals are able to protect savings.
“To believe that a digital asset can have the same property is a very big mistake,” Deev emphasized.
How to protect capital
Despite the impressive growth of individual cryptocurrencies and the entire market as a whole, investing all funds in digital assets is not worth it, recommended Mikhail Karkhalev, financial analyst at Currency.com crypto exchange. According to him, cryptocurrencies tend to fall in price very much, and after a collapse for several years they are cheap.
“Not every novice investor will survive 2-3 years of a drawdown of 50-60% of the investment amount. As a result, he will sell everything and incur a big loss, ”the analyst noted.
According to Karkhalev, the most ideal option for investing in digital assets to protect against inflation would be the formation of an investment portfolio in which the share of cryptocurrencies will not exceed 10-15%. The rest of the funds are best invested in stocks, precious metals, bonds and other assets.
The head of the analytical department of AMarkets adheres to the same position. He advises collecting a basket of assets in which cryptocurrencies will account for no more than 10% of the capital, since the risk of a fall in the price of bitcoin and other digital assets remains.
Cryptocurrencies are a high-risk asset, especially for an unprepared user, said Gleb Kostarev, director of Binance in Eastern Europe. According to him, subject to certain measures and the support of regulators, digital assets can become an effective and global means of settlement, as well as an attractive investment tool.
Residents of countries with a predominant share of the population under 40 should keep at least part of their savings in cryptocurrency, Kostarev is sure. With the current pace of medical development and the increase in life expectancy, pension funds will not be able to withstand the growing burden with the current conservative approach to investing in debt bonds or blue chips, the expert concluded.