Sep 27, 2021
Would Crypto Be A Good Asset To Have If Crisis Strikes
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According to a recent disaster preparedness survey, more than 75% of Americans are not ready with ample food or water supplies — even after going through COVID-19.
When it comes to money, some experts recommend a goal of $2,000 in cash on hand if banks go down. However, the U.S. Federal Reserve reports that nearly 40% of Americans couldn’t handle a $400 cash emergency. It makes sense to have a supply of food, water, and money available if disaster hits.
But disasters and crises take many forms. Natural disasters such as the spreading wildfires we’ve seen this summer across California or hurricanes ripping up the U.S. eastern coastline have caused mass evacuations. As we all saw and experienced last year, civil unrest or a pandemic can force families and individuals into protective lockdown.
Not to mention the possibility of an economic collapse. Consider the consequences if a country’s currency turns hyperinflationary, or supply chain disruptions cause prolonged stock outs at stores, or if there’s a repeat of the 2008 housing collapse that spread globally — producing an extended economic crisis, which can be just as dangerous as any natural calamity.
In all of those scenarios, and other macro level crises, would it be a good idea to have some of your investments in cryptocurrencies as well as a stash of cash, food, and water? The answer is yes — but it’s a qualified yes (besides the most important disclaimer that this is NOT financial advice).
Here’s why:
Scenario 1: SHTF aka Mad Max Post-Apocalypse
We need to remember that mass adoption of cryptocurrencies is still several years away due to price volatility, regulatory scrutiny, and technical complexity. So in a “S**t Hits the Fan (SHTF) scenario” where economic upheaval occurs or society breaks down, not everyone is going to universally accept cryptocurrencies as a method of exchange. In those circumstances, cryptos would likely be worthless.
In a “Mad Max” type of scenario, it’s better to have skills to barter such as woodworking, nursing, butchering, clothes and shoe mending, small engine repair, candle and soap making, etc. Additionally, fiat currencies might not be worth much either.
Perhaps the best option to consider from a “currency” perspective would be having a pre-supply of hard goods such as various size bandages, matches, candles, disinfectants, soaps, shampoos, zip-loc bags, toothpaste and toothbrushes, socks, large garbage bags, bottled water, plastic flatware, paper plates, toilet paper, aluminum foil, plastic tarp, zip ties, duct tape, and hand tools. All of those have multiple uses with heightened value in a SHTF situation.
If the power grid goes down, it will be difficult — if not impossible — to access the Internet and subsequent crypto exchanges to remove your crypto and convert to dollars. Even if you do get your funds converted and transferred to your bank, the banking system may not be fully functioning and could be down intermittently or permanently.
In that type of “worst case” scenario it’s a better idea to have a store of silver that can easily be measured in fractional ounces as a method of exchange, such as these Canadian, two ounce silver plates. Each plate comprises 19 silver “coins” featuring unique weights and multiple denominations that form two ounces of silver.
These silver “flex” coins are a solid store of value, have served as a trusted method of exchange for centuries, with a stamped unit of account in both troy silver ounces and dollar equivalent, which most everyone understands. Unfortunately, cryptos lose in the SHTF scenario.
Scenario 2: Economic or Financial Collapse
Alright, enough dystopian dialogue — which is unlikely to happen anyway.
However, a temporary government shutdown, extended recession, or economic collapse in some country is much more likely to occur, sending shockwaves across global financial markets.
In those instances, select cryptocurrencies such as Bitcoin and Ethereum would be your best options as an extended store of value, with a stablecoin such as USD Coin as a preferred method of exchange and unit of account.
As long as the electric grid, mobile phone networks, and Internet remain intact, those crypto assets can be used for any type of peer-to-peer payment or transaction that functions independently of a bank or government.
It’s best to have the bulk of your cryptocurrency assets off-chain, in a cold wallet storage such as a Trezor or Ledger hardware wallet — before disaster strikes. Also, be sure to keep those cold storage devices in a secure location that’s physically separate from your wallet recovery phase.
Your cryptos can be kept safe from hackers in cold storage, until you feel comfortable bringing them back online. Avoid storing any non-stablecoin cryptos not in the top-10 market cap rank — people will only care about the major cryptos (if they care at all) during a crisis..
Scenario 3: Natural Disaster Evacuation
In any evacuation scenario, cryptocurrencies are arguably the best asset due to their discrete portability and easy mobility.
Whether it’s a hurricane, flash flood, chemical spill, nearby riot, tornado warning, bomb threat or anything else that requires you to leave quickly, your cryptocurrencies in a cold storage wallet are your best choice.
You can hide it in a coat lining or in plain sight hanging on a keychain. It’s simple to instantly move and hide literally billions in assets stored on one of those devices — try that with any other asset.
Simply move yourself and loved ones out of harm’s way, to an area with mobile phone service or Internet connectivity and you can access your cold storage assets. Make sure you don’t leave your recovery phrase in the disaster zone — otherwise your cryptos may never be unlocked if the recovery phrase gets destroyed or lost.
Disaster Diversification
Bottom line, no single asset is perfect for every disaster scenario. As with your investments, your “disaster assets” should be diversified and mobile.
Keep in mind, your most valuable assets can change during a crisis. For example, in a protracted global food shortage, a bag of protein bars will be more valuable than an ounce of gold in a few months.
Make sure to have a few weeks supply of food (minimum 2500 calories per day per person) and water (minimum a gallon per day per person) at the ready. Be sure to also have a mix of cash and easily divisible silver available for use, and cryptocurrencies in a cold storage wallet — don’t forget the wallet’s respective recovery phrase.
Cryptocurrencies might be a solid asset option if a crisis strikes — as long as the power stays on and Internet access is available.
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