How Bitcoin and Gold Can Solve Jamaican’s Dependance on Their Weakening Currency
Over the past few years, the Jamaican Dollar has fallen to record lows versus the U.S. Dollar. With the spectre of inflation looking to further drive the Jamaican Dollar lower, the Jamaican government should take some decisive action to protect their currency. Two of the most effective ways that the Jamaican government can shore up its dollar is through a sovereign investment in Bitcoin and gold. Here’s a look at the pros and the cons of both stores of wealth.
Investing in Bitcoin
Bitcoin is probably one of the hottest investments out there. That’s because Bitcoin is the leading cryptocurrency that is valued for its limited supply and its worldwide acceptance. Currently Bitcoin is growing as many fans as detractors. Bitcoin’s main attraction is that only 21 million units of the cryptocurrency will ever be mined. That protects the cryptocurrency from devaluation.
Pros of investing in Bitcoin Easy to buy in large amounts
Chances are that the Jamaican government will want to purchase hundreds of millions of dollars of Bitcoin in order to properly back up their currency. With Bitcoin, the government will be able to make that complete purchase in less than a day from a number of different cryptocurrency markets that operate 24 hours a day. Also, the Jamaican government discreetly makes their purchase so as to not drive up the price of Bitcoin.
No storage issues
All of Jamaica’s Bitcoin holdings can be held in a single Bitcoin wallet which can exist in a cold storage vault through a cryptocurrency exchange. The Jamaican government can also elect to take physical possession of the Bitcoin in their own hardware wallet. This is more efficient than having to store cash or precious metals in a physical vault.
Easy to liquidate
Bitcoin is not only easy to buy. It is also easy to liquidate. That’s because all the Jamaican government needs to do is simply put their Bitcoin up for sale in an exchange and get offers for their cryptocurrency in seconds. This not only saves time, it also saves in transaction fees compared to other stores of wealth.
Cons of investing in Bitcoin The price of Bitcoin is volatile
Owning Bitcoin is quite a roller coaster ride. While the average return of Bitcoin is around 200% since its inception, the cryptocurrency has lost more than half its value more than once. Therefore, one requires a strong stomach in order to hold this cryptocurrency.
Other governments may be opposed to the Bitcoin purchase
Recently, the government of El Salvador had issues with the World Monetary Bank which opposed Central American’s decision to purchase Bitcoin. Jamaica could face the same opposition from governments who do not want to see a challenge with the current fiat monetary system.
Investing in gold
For thousands of years, gold has been seen as the ultimate store of wealth around the world. Today, gold is still considered the most respected store of wealth. Because of this, gold has held its value for thousands of years. In fact, no other store of wealth has held up its value quite like this precious metal. In times of inflation and hyperinflation, gold is usually seen as one of the most attractive investments.
Pros of investing in gold
Thousands of years of wealth protection
Since the beginning of civilization, gold has been accepted as a store of wealth. Compare that against fiat currencies which tend to become worthless in less than 100 years. In fact, the longest lasting fiat currency is the British Pound which has been in existence for 355 years. Also consider the fact that all currencies lose their value over the long term. In fact, the U.S. dollar has lost 96% of its purchasing power since the currency has been removed from the Gold
Standard! Gold has been in circulation for over 5,000 years and has never lost anywhere near that amount in value.
History of currency support
Some of the strongest currencies in the world include countries that have huge gold reserves. Take the country of Switzerland, for instance. The Swiss have over 1000 tons of gold in their reserves. This makes the Swiss Franc one of the strongest currencies in the world. Jamaica can quickly enjoy a stronger currency with a major investment into gold.
Little chance of major devaluation
Unlike Bitcoin, gold does not go under major crashes that could send its price down 60%, 70% or 80%. At the worst, gold tends to fall about to half of its all-time high price during major precious metal crashes. This puts a high floor on the price of gold.
Cons of investing in gold Challenging to store
Jamaica will be tasked with the challenge of having to store tons of gold somewhere in their country or out of their country. This can pose a security challenge for the Carribean country. Also, storing gold with a foregin country can lead to some significant storage costs.
Harder to liquidate
If the Jamaican government ever decides that they want to sell their gold, then they will have to deal with the challenge of delivering the gold to their buyers. Compare that with Bitcoin where the cryptocurrency can be placed on the market digitally and sold in seconds.
Why Jamaica needs to make a decision quickly
Inflation is beginning to take hold worldwide due to a number of issues. Because of this, we could see smaller and less stable countries collapse on the weight of higher food prices, higher commodity prices and an overall lower standard of living. Jamaica can do well by purchasing some Bitcoin and gold while the prices continue to be at reasonable levels. During inflationary times, fitinte stores of wealth can become hard to acquire.
Protecting wealth with Bitcoin and gold
Jamaica can gain some great benefits by backing up their currency with a combination of Bitcoin and gold. Both of these stores of wealth can help stop a falling Jamaican dollar. Continued investment in both Bitcoin and gold could help make the Jamaican dollar one of the strongest in the region.
REFERENCE:
https://jamaica.loopnews.com/content/jamaican-dollar-slides-record-low-against-us-greenback
