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Financial Lessons to Learn From COVID-19

With everything going on in the world today, one thing has become clear. People and businesses do not know how to save. The shutdown caused by Covid-19 has shown that when businesses and individuals stop earning money, they have a very small runway before they run out of cash. A JP Morgan study into 597,000 small businesses in the US shows that they only have about 27 days before they run out of money. Governments all over the world are putting together stimulus packages that will effectively give people cash so they can stay afloat until they are allowed to get back to work.

 

Who Is Responsible for Economic Decline?

There is plenty of blame to go around. Wages have not kept up with the cost of living and the rate of inflation . People generally choose to consume rather than save. And lastly, to no fault of their own, some people simply live paycheque to paycheque no matter how hard they try to save. Bitcoin does not solve all of society’s problems, but it does have a role to play in the mess we are in right now.

Bitcoin can be used as a savings tool to protect people against situations like this. Perhaps, the world economy would’ve had a soft landing as opposed to hard fall if people had some savings to dip into when they were forced to stay home because of the virus. Perhaps people would’ve chosen to consume a bit less every month and a save a little bit more, knowing that the Bitcoin they are holding, and saving should increase in value over time. A lot of people and companies would be in a better situation and less reliant on the government for bailouts if they had just saved a little bit more.

 

Why is Bitcoin Good for Savers?

Bitcoin is a perfect savings tool for many reasons. It offers more upside than a traditional savings account with a bank. With interest rates at all-time lows, yields from savings accounts don’t even beat inflation these days. Also, Bitcoin is built to be uncorrelated to legacy financial products. It offers holders an alternative when all other financial assets are headed in one direction. Lastly, the barriers to entry are so low that anyone can participate. At The Coin Shack, we preach the concept of Dollar Cost Averaging (DCA) to all our clients that ask us how much they should buy. That question is impossible for us to answer because every situation is unique. Instead, we tell our clients to buy a little bit at a time weekly or monthly. This way truly turns Bitcoin into a savings tool and less of a speculative play. In all our years of experience, we have found this to be the best, most risk-averse method of accumulating Bitcoin!