In these uncertain times, Bitcoin and cryptocurrency are proving to be welcome solutions for investors
South Africa is on fire and trust in South African banking is going up in smoke. On July 13, 2021, the shares of the major banks – Nedbank, Absa, FirstRand, Standard Bank – fell an average of 5% as a result of the current unrest in the country.
The rand plunged to a three-month low against the US dollar, hitting R14.67 and losing almost all of the gains it had made since early 2021.
This is not quite the catastrophic rate we saw in April 2020, at the height of the pandemic. But potential long-term food security threats, especially if the violence spreads to other parts of the country, mean the currency could have a rocky road ahead. Coupled with a record unemployment rate of 32.6% (and a staggering 43.2% of the total labor force), the outlook for South African markets looks bleak.
Citibank has reduced its exposure to forex and bonds, betting that the unrest will continue.
In the expectation that the rand will continue to decline as COVID-19 cases rise and the vaccination program halts, some investors are even closing the currency empty.
Why bitcoin and cryptocurrency are the right investment right now
Since the relocation of decentralized finance (DeFi) from relative obscurity into the mainstream as a result of the “DeFi summer” 2020, a wealth of financial solutions has emerged that were previously only available in the area of traditional financial institutions.
As a historically volatile asset, few would have ever pointed out that Bitcoin would one day be the lifeguard for investors desperate for somewhere to place their rand.
But the latest statement from Apple co-founder Steve Wozniak that Bitcoin is a “mathematical miracle” serves to illustrate why Bitcoin – and cryptocurrency as a whole – is exactly the miracle investors could need right now.
“In times of turmoil, reducing risk is important, as Citibank has done, but that doesn’t mean investors have to stop making returns because of it,” said Jon Ovadia, CEO of OVEX, a South African cryptocurrency exchange and Prime Brokerage that specializes in over-the-counter (OTC) trading, arbitrage, and high-yield cryptocurrency accounts. “DeFi opened the doors to previously unanticipated opportunities to generate returns on Bitcoin and cryptocurrency. At OVEX, we designed our tools with South Africans in mind so that people can invest in cryptocurrency and still get returns, regardless of whether the ZAR crashes or not, ”says Ovadia.
One of the ways the company is using to generate completely risk-free returns for its clients is to take advantage of the price differences in cryptocurrency between overseas and South African exchanges and take all of the risk for those trades themselves. The customers achieve a uniform return of around 3% for these arbitrage trades.
For institutions and wealthy individuals, OVEX a personalized service at the counter, and uses its extremely high liquidity to conduct high volume business. This is an excellent solution for those who are losing edge quickly and want to exchange them for a more stable cryptocurrency (like the stablecoin TrueUSD).
Stablecoins are crypto assets that are fully secured 1: 1 by the FIAT currency, which means that the price is extremely stable and non-volatile. A couple of great examples of this are TrueUSD (TUSD) and Tether (USDT). OVEX offers returns of up to 20% per year on these stablecoins.
“Our high-yield accounts are another way for investors to earn risk-free cryptocurrency,” says Ovadia. “By trading Rands for a stablecoin like TrueUSD and then earning interest on that asset, South Africans can ride the current wave of instability while making returns.”
Prior to the current upheaval, the rand was number one among emerging market currencies. If the violence can be quelled quickly, hope remains that the currency can continue to recover after a difficult pandemic. In the meantime, investors can hedge against losses by taking advantage of the many risk-free services that DeFi exchanges like OVEX are now enabling.
In the turmoil, Bitcoin and cryptocurrency might just be the solution to saving the returns of worried investors.
Click here to learn more about OVEX’s arbitrage and interest account services.
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