People Using Cash-Savings to Load Up on Bitcoin as Protection in a Record Low-Interest Rate World
The 10-year Treasury note yield fell to its record low stretches, not seen in 234 years, according to Deutsche bank.
“The U.S. has been through depressions, deflations, wars, restrictive gold standard regimes, market crashes and many other major events and never before have we seen yields so low back to when the Founding Fathers formed the country,” said Jim Reid, chief credit strategist at the bank.
— Lisa Abramowicz (@lisaabramowicz1) July 31, 2020
“In the year 2007, it was normal to get a fixed return of 5% when lending your money to the U.S. government for ten years. Today, you'll be lucky to get 0.5%,” wrote analyst Mati Greenspan in his daily newsletter Quantum Economics.
With yields falling into negative territory — if we factor in inflation over the next 10-years, you are going to lose even more — and the Fed deciding to keep the interest rates virtually zero, investors are running out of ways to get meaningful returns. And this is why gold and digital gold make an attractive option.
As such, people are increasingly using their interest-earning cash savings to load up on bitcoin, especially as volatile assets take off, said Bloomberg.
The coronavirus pandemic has actually been a boon for account balances — not only lockdowns cut consumer spending, but central banks also injected money at a record pace. The personal savings rate in the US rose to a record 32.2 in April but fell to 19% in June, still at historically high levels. Also, between March and June, customers deposit 16% more into their accounts compared to last year.
But is it really the time to hold onto money when the US dollar continues to lose its value thanks to the Fed printing trillions of dollars and the interest rate on traditional safe vehicles falling.
Being up 58.81% in 2020, Bitcoin sure looks appealing just like gold, which has risen 29%, setting a new record. The largest cryptocurrency has been actually the best performing asset of the last decade.
A few months back, billionaire investor Paul Tudor Jones also announced that between 1% and 2% of his assets were held in bitcoin as protection in a low-interest-rate world.
Stocks that have been surging since bottoming out in March — recording its best 100-day performance between March 23 to July 1 since 1933 are also preferred by people in such an environment.
Americans have gained confidence in the market in the long run. A Bankrate survey found 28% of Americans, up from 20% last year, said the stock market was their top choice for long term investment. Cash investments meanwhile hit their lowest level in eight years at 18%.
Bitcoin coming to your near bank
While bitcoin started rallying last week, hitting a new 2020 high today, national banks have got the green light from OCC to offer custody services, which may open new doors for the crypto industry. It may have started with national banks, but it won’t be surprising if state-chartered banks jump in too.
“The door’s just been opened for funds, institutional players, and investment advisers” to expand their relationships to crypto, Kari Larsen, partner at Perkins Coie LLP in New York, told Bloomberg.
This decision has been made after the OCC received questions from several banks about holding digital assets, said acting Comptroller of the Currency Brian Brooks, a former Coinbase employee.
Agency’s decision to allow banks to hold bitcoin and crypto is “a recognition that tens of millions of Americans are invested in this asset,” he said at a virtual conference hosted by the American Bankers Association.
The OCC’s decision would also make it easier for crypto companies to work with banks, which viewed them as high-risk customers due to concerns regarding anti-money laundering (AML) and compliance with the Bank Secretary Act.