What does cryptocurrency tell us about Currency diversification?
There’s a lot of volatility in the markets today, reflective of the volatility that is happening in the world. In some places, like India, the government is rendering the cash without value, prompting a run on banks to get it turned in for credit before the deadline. If the government can declare that your cash is without value, what else can happen to wipe out your hard-earned wealth? Theft of all forms of currency is as old as currency itself. Back when gold was the preferred global currency it was often stolen. Today digital currency, like credit cards and cryptocurrency, are under constant attack from hackers and scam artists. Americans, and folks all over the world, are using less cash because of fears of theft and the ease of plastic, but is it really any safer?
There’s a perception that plastic is totally safe, but someone, usually small businesses, have to pay the price for fraud and theft.
Political volatility is another threat to currency. States can cancel the worth of paper currency, banking systems can go down from hacker attacks, and cryptocurrency can fail from its total reliance on computers and the internet. Gold is still universal, but it is hard to safeguard, hard to convert to spend, and is easily stolen and not recoverable.
So how do you ensure you have access to your money no matter what the world throws your way? The answer is currency diversification. Putting a little bit of your wealth into multiple forms of currency, even foreign currencies, can help you be prepared for whatever happens in the world. If the web goes down you will still have cash to spend. If the government devalues your cash you will still have Bitcoin to spend. And if civilized society fails gold will always have value.
There are even some governments that are backing cell phone apps in place of plastic and cash, such as Denmark and India. This makes it easier for the government to track your spending and less likely for you to be able to commit fraud or evade your taxes. Proponents say it means there’s less stuff to carry and keep up with.
Learn more about the importance of currency diversification from this infographic. With all the volatility in the world, you just never know what is going to happen to the banking system, the internet, or your own government. Are you prepared for a currency emergency?