Topic: Has anything been a good hedge against a financial crisis? (Read 380 times)

There are millions of people who are trading and many are only investing, but against financial crises I think nothing can be better than trading for long there with crypto currency or to invest in bitcoin for long term, long ago I suffered financial crises because I was not having any job to earn, at that time I joined bounty but now I am trading and investing.

trust is indeed a determining factor for being able to hold it to date. many of the bitcoiners panicked until they finally came out. but by seeing good potential, we can see a bright future

yes I know one crypto that has been good this time even if it is all about bear market still they earn a lot. A professional traders has offer to trade in and now the coin continually grow in terms of its liquidity. Many are still holding because they know the worth of the coin to which now it has been allegedly raising up to 1000% from its ICO price.

I wouldn't necessarily think that commodities are great bets. Especially when you have perishables.

The thing is that, if you are spending your money on emergency food supplies (like certain preppers are already doing at this moment), you are taking a huge gamble that a very specific scenario will occur in the next financial crisis. You've also got a time limit on this hedge, since even though these food supplies can last a long while, they don't last forever.

Also, in a deflationary scenario, is it really likely that having such high amounts of food stacked up is going to help you in any way? Probably not. Keeping some emergency food/water supply is good, but I wouldn't go overboard and see it as a financial hedge, since it is simply completely illiquid.

As to oil - I agree. Not only what you've already mentioned already, but also the fact that you're likely not going to hold it in physical form means that there is a counter party risk present.

I wouldn't bet on any assets at first because I know to myself that its not the best time to hold one. If we are in a financial crisis right now I wouldn't move up any of my cash to assets or if I have assets (except for Real Estate) I would sell them all before it even gets worse. Although the cash I will have will be vulnerable to change the assets like Stocks will be the first one to fall as investors would definitely liquidate most of it. So if the market has breath already this is when its the best time to buy any assets you can afford.

There's really nothing else. A financial crisis followed by recession is fundamentally a contraction. It's a shrinking of virtually all aspects of the global economy and at this point national economies are incredibly interdependent, so financial contagion among countries should be expected. That means everyone pulling money out of everything at the same time. Speculative assets usually suffer the worst and for a short time, cash is usually king.

One twist though is we need to consider the viability of fiat currencies. If a financial crisis leads to the actual collapse of fiat currencies like the USD, all bets are off. In that situation, I expect gold to fly. Maybe Bitcoin too, although that's a riskier bet.

I have no idea how likely a major fiat collapse is though. I'm not sure what % chance I'd give it.

If we are talking about truly devastating events leading to absolute collapse of economy, pretty much the only thing people will care about is food. Flour and rice will be the most important resources, but of course people won't buy them for money, because nobody would care about money at this point. Having animals for milk is also important, because milk is both tasty and nutricious. But this is the case of famines, not a global economic crisis like the one in 2008. In the case of the crisis the only thing that can go up is bets against the market that will collapse. There might also be areas that stay unaffected, but I think it depends on what caused the crisis and how broad its impact was. And I think that when the collapse of fiat causes economic crisis at some point in the future, cryptocurrencies will rise, because they can offer a way out of the system that depends on authorities so much.

I know gold hasn't been doing too good the last few years but I still think its a good hedge against other investments.  Gold is one of the few things that has held value for thousands of years.  It won't grow much but it will still be extremely stable over a long period of time.

You mean like tinned stuff that theoretically never expires. Uht milk (it's the UK, no one will go without a milky tea for long even if its disgusting) or syrup and sugar which also don't really go off (maple syrup has a date of about 100 years).

You kinda need fruit though at some point...


Yes oil isn't a great hedge as we already have electric cars which are cheaper to run and they'll probably come down in price in a few years.

Food could be a good hedge... light weight/dried foods with long shelf life, alot of them, followed by really cheap essential products. Like solar energy powered light bulbs,  solar chargers, cheap security gadgets,
Food are my favorite though.  Whether sold or not you still have nothing to lose as you can depend on them and not spend much on feeding. .

I think what will be required is to create more awareness; it shouldn’t be difficult for users to understand. I believe once people pick so much interest, understanding the system becomes easy.

 A number of people run daily transactions on websites, engage in different online activities and they do not find it challenging. I believe once people now have a good understanding of crypto, there will be increased number of users. Like you have mention, cryptocurrency is fast developing and its  worldwide adoption is close

It all depends on the crisis that is facing the society because if it economic crisis, then stockings for long term is the way to go and buying currencies with stability and ability to increase in price.

Bitcoin is definitely a good hedge against a financial crisis. Look at Venezuela for example (or turkey last year as well), people who hold their own money (bolivar or boliver something like that) realized their money worth nothing at all and they couldn't even buy food, I have seen a women boil a shoe in water to eat later on because it had fibers in it and would prevent them from dying. They are that poor right now (maybe not all but those people exist) many people died of starvation because of economical mistakes done by the government.

However, people there who hold bitcoins, they are not rich, not rich enough to live on a palace because after all when a whole country is missing their money there is really nothing you can buy, you can have billions of dollars but when you go to the market there is nothing on sale so your billions worth nothing, but at least bitcoin holders managed to make sure their networth didn't went down like all others.

Whether there is economic crisis or not, people will always need the things to complete their basic necessities. I guess in crisis, your source of income will be going to dry up so I guess it is better you have stake on business that is required to fulfill the basic needs of people. (At least that business will not be affected.)
A little house of your own will be a good idea to cut down the expenditures.

I would say that it is best to invest in real estates because no matter the level of economic challenge people would still need a roof over their heads. People tend to sell off precious metals just to raise money and most times the value of these metals will start dropping because of the way people are selling it but it’s not always the same with housing.

Those whose jobs have been affected would still need a house to live in. It is very rare to see an economic challenge that would affect the value of housing rather the value keeps increasing even during economic challenges because it is one vital thing people cannot live without.

These items should be very valuable when the real crisis occurs: canned foods, bottled water, gasoline, gun, and ammo.
At least try to stock these items before you hoard gold, bitcoin, etc.

Apart from gold which is the obvious choice there is property which normally holds it's value well. It did crash in the past so it's not 100% safe. Bitcoin will be the new hedge, it is in venezuela already

Wrong. It will be the other way around.

They want to save the value of their money so they input it with stones.
To save themselves from the drought that will happen.
Actually, that is more of the reason why a sudden fall will happen. They always panic even if it does not happen yet.

Survival will be the key and that is why gold will have a greater value or will just stay at the same value.
Some will sell but wise people will buy more instead of looking back to stocks, bonds and mutual funds.

If given a chance then invest with water or electricity companies. The necessities of the people whenever they dont have money anymore.
But I doubt they will let in some average people like us.

It depends on what the nature of the financial crisis is, really.

If it's inflationary, then in previous instances, gold and silver have performed well relative to a country's fiat currency, mostly because people see it as a sort of hedge against inflation. This is a reason why I think holding bitcoin will serve as a hedge if you believe that some sort of hyperinflation is going to come by, because it does have a capped supply, and essentially has all the monetary aspects of gold and silver.

If it's recessionary or deflationary then I think the most important aspect you can look for is liquidity. You want your entire investment portfolio to be liquid, even if that means holding fiat currency for the short term (it's not always a bad thing). I personally think that BTC, gold and silver will still outperform property and shares in these instances.

Bitcoin is the first that was actually considered to be digital Gold. Alternative crypto currencies aren't even close to that. If I had to categorize them, they would be similar to fiat currencies. In both cases they are created out of nothing and just because people are foolish enough to buy them they have some sort of a value.

Real estate is good if you want to preserve wealth or create a passive income stream within a steady economy. A financial crisis means people losing jobs, lower overall incomes, etc. This basically puts pressure on your passive income streams out of real estate, so it might not even be that good of an option after all.

I would personally stick to what I have already, which is Bitcoin and fiat. You can't know beforehand what will be the best safe haven to sit in during a financial crisis, not even with Gold that people tend to agree on is a safe haven. It's Russian roulette that you are playing if you try to position yourself well.

I disagree if bitcoin is positioned as the first alternative to avoid the financial crisis because there are many ways to avoid this. If bitcoin is positioned like that then more and more people are thinking negatively about bitcoin and this will hinder the development of bitcoin in the future.

You're actually right, but in a perspective of someone whole sells their gold into a pawn shop or some greedy bastard who has taken advantage of the situation of a person who doesn't have money.

Bitcoin obviously has some features that he took from gold but it is definitely not about safety. At all times cryptocurrencies were considered as a risky asset and there is no chance that an asset, that was risky at a stable time will somehow become safer than the things that were considered as safe.
If you feel like the economy in your country will collapse soon then go get a mortgage in your local currency. If your prediction will be right then you will even earn some good profit.

I guess we just choose which one. on the one hand cryptocurrency is like digital gold, but has a high risk. on the other hand, real estate is a good investment tool, but requires large funds to buy it

My intuition is that jewelry (precious metals and gems) would be good stores but I then remember that pawnshops haggle to get the price down on a regular year. On a bad year they'd haggle even more.

I think real estate is still safe assuming you can hold on to it until the prices rebound. I heard some people have rentals for different price ranges meaning when their tenants move out on a crises, there will still be people moving in - those who moved out from more expensive areas.

This question have a very logical answer actually! Just compare prices from before and after crisis! Now you have your answers I believe.
Crisis is just like a drop in crypto. You were rich when prices were on ath, now you have 90% less. But what is the point, when do you buy? You don`t buy when prices are hitting the roof! No, you sell in that moment what you have and you are stashing gold, diamonds, dollars, euros, have a little from everything. When the dip comes, when crisis hits the economy of one country you are buying, everything is cheap, everything is for sale. I been there, I felt that. Now I`m in crypto and I feel much safer than ever, cause I know how things works.

In my opinion the best way to store your money during a financial crisis is with precious metals or real estase. Even though both of this investments are going to have problems during tough times, and their value is also going to drop i think their value will quickly recover as the crisis slowly disappears. 

This isn't a bad idea. I have relatives and friends that are builders, electricians and plumbers. So with enough money it would be quite cheap to do up or build a house... I kind of have enough to invest in a plot of land I'm not sure how much a house costs to build although I guess a 4 bed would be around 50000-100000 in materials.

Edit: I'm near a rural area so land should be a lot cheaper there...

True. Finances are always in its roller coaster situation and there will be no guarantee or assurance it will be protected. Even banks get bankrupt and if you are lucky to reach the bracket of insurance then you will be able to get paid with some amount (not equivalent to your own money saved) but if not or below the bracket then you will just be sorry for yourself then. I think there is one classic way on how you could keep your money regardless of the financial crisis. Real estate, or at least invest your money in a property. With real estate, as the years pass by you will have your property with increasing value on it.

What goes up? - The number of bad debts. House repossessions, unemployment, asset disposal ( this could be why gold may not rise ), suicides.

If you have cash, then it may be a good time to pick up assets. For example, a house that is sold at auction,and needs some maintenance work could be a good buy. If you arrange a deal with a builder for the improvements to be a background job, then you should be able to get the price reduced. Of course, this means the job will take longer to complete, so you will have to consider possible loss of income if it is an investment.

I'd also agree that precious metals are still the most sought-after hedges during a financial crisis, but as you pointed out, it has become inflated over the years, and may be in a bubble for all we know. Though even if that's the case, a lot of people will chose these metals than any other investment out there as they know that other people would be looking at the same options, too, and if the need for fast cash arise, they can easily sell it to some other people who's also looking for these metals. Supply and demand with these metals will just even out the scale, and would therefore cause no steep inclines on either side of the spectrum, making its value somewhat stable compared to other options out there.


That's why it's better to get a house fully-paid first before getting something that you'll have to pay over the course of a few years (like a new car). Anyway, perhaps I'm just lucky enough to have made some good profit off of the previous bull run and bought myself a house, established a small business and bought an ancient, 20-year old car that still gets me to places whenever I need to. I'm still a bit short on investments and am still looking for alternatives, though I must say that the local stock market scene is quite promising at this time of the year, and should a financial crisis be knocking at our doors come 2020, I may have made some good profit on stocks already if I start investing now.

Jet Cash always thinks the housing market is in a bubble at this point. And I suppose to buy a house I'd have to pull quite a bit out of bitcoin and litecoin which I don't really want to do as I'm not sure where they're going atm and I could pull out just as they shoot up.

People who don't even do economics or anything say we'll probably have a financial crisis by the end of the decade (in 2 years' time which is quite worrying)...

As I said previous metals (the cheap stuff like gold and silver) aren't the best and they're also widely over inflated thanks to the bank if England selling 2x the amount of gold that has already been mined and pretending they have it in their vault... Caesium and rubidium may be good though.

The only thing that comes to mind, based on the previous financial crisis (2008-2013ish), is precious metals.  But even they weren't exactly a perfect hedge, because they started falling in 2011 after gold & silver peaked.  But they were rising significantly as the crisis was unfolding, and you certainly couldn't count on stocks, bonds, or real estate during that time period.  That was also a global crisis, so most of the world was suffering the same pain and could look for the same sort of hedges.  By contrast, the current crisis in Venezuela is isolated, and anyone with money could find a hedge in metals, stocks, or even crypto.

I think real estate has traditionally served this function, and I do think that there are benefits to owning a house, for example.  The problem is that if you lose your job in the midst of a meltdown, you might not be able to keep up with your mortgage.  Nor does it help you if it's the housing market itself that's melting down, as it was in 2008 or so.  If your house is paid off, though, at least you'll have a place to live.

Apparently gold never does very well in financial crises because when people stop earning money they start selling them and thus their value goes down..

Maybe its a hedge but also its potentially risky...

I've had a look at cds but there seems to be a lot of research involved in finding the right one so I'll have to wait on that.

There are many things where you can put your money to hedge against financial crisis. Let me list down a few for you,

1. Precious metals like Gold and Silver
2. Precious stones like Topaz or Diamond
3. Real Estate (depending on the nature of financial crisis)

Among these three types of investment, Gold is most sought after asset to hedge against a financial crisis. It not just only provides capital protection but also provides liquidity whenever required!

Yeah, there are many types of assets that you can buy to make money in a crisis. Economic crisis are mainly a product of defaults on debts by large players. You can buy Credit default swaps that will help you make in a financial crisis. Credit default swaps are instruments that place a bet on whether the country/institution will default on it debt repayment. Though, I am pretty sure that these instruments are not available to an ordinary citizen. Connect with you hedge fund/ Investment banker to know more.

I'm wondering if anything actually goes up or stays stable during a financial crisis since most things seem to fall. Meaning that currencies potentially go up during a crisis (bitcoin is considered to behave like gold at this point) but since currencies are always horrible to put money into (not necessarily short term but long term with inflation), what else?