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Andrey Elinson, the founder of an international school of cryptocurrency trading, shares his thoughts on whether to invest in cryptocurrency now and how crypto can help us to survive the economic crisis.
Throughout 2022, investors remained hopeful that the global economy would improve. However, as days go by, it is becoming increasingly difficult to stay optimistic. No one has any prophetic revelations about the crisis. Some rating agencies predict the onset of a global recession in the next few months, while others think we have more time to "prepare ourselves."
Dangerous symptoms abound as GDP growth forecasts have worsened. For example, a year ago, the IMF had forecast global economic growth of 3.8% in 2023; by October 2022, the number had dropped to 2.7%. Fitch has lowered its GDP growth forecast from 2.7% to 1.7%. The difference between short and long-term government bond yields does not add to our optimism either. Since summer, the average monthly rate difference between 2-year and 10-year U.S. treasuries has not risen above 0.15 p.p. How bad is that? Judge for yourself. ACRA, for example, points out that this indicator has worked in seven out of nine cases of global GDP decline. This means that investors are still saying, "Guys, a lot of the risks are well above the long-term equilibrium..." Analysts point to another dangerous indicator — rising energy prices. They were actively growing in 2022, causing the cost of producing goods and services to swell as global supply shrunk. Yes, the prices have since dropped slightly, but they still sit above the pre-pandemic level.
Does this mean there is every reason to believe that recession is imminent and there is no hope for the best? Well, not necessarily. ACRA also talks about some positive signs. For instance, the economy's overall dependence on energy prices is decreasing, and regulators are trying to mitigate local crises as quickly as possible. If we look at spreads, asset prices, and rates, we will see that the financial stress is still low. The labor market is more or less stable, as are company budgets in the real economy.
But 2022 has shown us how unpredictable things can be. Even in the absence of a major financial crisis, a serious growth slowdown in certain countries will have dire consequences. In January 2023, business magazines actively predicted high interest rates, energy prices, currency crises, mounting debts, and massive layoffs in large companies.
How to Survive a Recession
The best option is to prepare for different scenarios. First, keep your finger on the pulse and watch the countries at risk and the center of the global financial system: the U.S. Will there be a recession there? Will unemployment rise? Will the Federal Reserve System change its policy? All these factors will determine how events will unfold.
Second, look for the best ways to survive the potential crisis. Roughly speaking, we are all currently deciding where to invest the money we have shed blood, sweat, and tears to earn to survive the "dark times." (Ed.: Despite the 2014 crisis, Andrey Elinson has kept his company afloat and expanded its capital 1.5-fold.) Based on the current market situation, several steps seem reasonable. For example, it is not a good idea to pool all your money into stocks as the prices are too volatile, but you may buy something long-term. Of course, bonds are much safer, especially those issued by companies with a credit rating of BBB or higher. Investing in high-yield bonds is too dangerous because of the high risks and highly questionable profits. Those with access to U.S. securities may invest in stocks and exchange-traded funds (ETFs). Some experts advise taking a closer look at gold: theoretically, this asset has prospects. However, gold has long been unable to offer any reliable protection.
Looking at the changes in the cryptocurrency market, many analysts are inclined to believe that crypto can help investors through hard times. I also share this opinion. (Ed.: Extensive experience with cryptocurrencies has prompted the author to help other investors use this tool. To this end, Andrey Elinson founded an online cryptocurrency trading school in 2020.) On the one hand, everyone got spooked by the problems faced by several major crypto projects last year: the collapse of the Terra ecosystem (LUNA), the Celsius platform (CEL) crisis, and, to top it off, the downfall of the FTX group of companies. As a result, venture capitalists significantly cut their investments in cryptocurrency at the end of 2022 after two years of growth.
On the other hand, while some traders were mourning their lost money, others were finally beginning to think about how the market works and why some projects continue to grow as others collapse. For example, the innovative services Monero, Secret Network, and Firo are feeling confident. Polygon (MATIC) and TON Coin (TON) have also shown considerable growth. It turns out that investors who don't fall for ads and pay attention to the tools that have little to do with marketing and hype can make good money even in challenging times.
The market cleansing itself is also a favorable factor. For example, the collapse of the "careless" FTX has made it much easier for traders to evaluate projects correctly, exercise caution, and take fewer risks. We can assume that the "sell-offs" have already peaked, and the lows have bottomed out. Everyone who was supposed to go bankrupt has already done so. There is a good chance that investments in crypto services will soar as early as in spring-summer.
There is one more positive trend: as cryptocurrency regulators become more active, the situation with technology is changing for the better. For example, more and more ATMs in Europe now allow users to convert cryptocurrencies into cash. Sometimes this even happens without KYC (Know Your Customer) procedures. In other good news, Elon Musk has promised to add cryptocurrencies to Twitter's new payment system.
As for the global economic recession, it will, of course, also affect the cryptocurrency market. However, large institutional investors do not write this tool off and expect it to grow. Even Fidelity Investments, which manages $4.2 trillion in assets, is registering trademarks related to cryptocurrency trading, NFT, and metaverses.
The Rules of Investing
While 2023 may not be a breakthrough year for the market, I believe that cryptocurrency will definitely help us to get through it. My extensive experience with Bitcoin tells me that this currency has tremendous potential. (Ed.: Andrey Elinson started investing in Bitcoin back in 2012. At the time, he invested $3,000 in this cryptocurrency. Bitcoin's growth confirmed that the business was lucrative and allowed the young investor to quit his job and engage in cryptocurrency trading more professionally.) The profit it generated in January more than proves it. Although there may be periods of "frosts" and "thaws," Bitcoin is generally reliable and stable — precisely the qualities investors look for in projects in times of crisis. Stablecoins pegged to the U.S. dollar and gold also hold promise. After all, they may be called the main tool of market liquidity.
I have also teetered on the edge of risk and common sense many times. In the case of cryptocurrencies, this strategy brings good results. (Ed.: Andrey Elinson has previously admitted that his path to success was difficult. His first attempts at investing weren't the most spot on, but justified risk and a personalized investment strategy have let him achieve the desired result in cryptocurrency trading.) But in order not to snap and go bankrupt, you need to follow several mandatory rules. For many traders, they have become an internal business law. For example, never go through with deals if uncertain and if you have no step-by-step force majeure scenario. Learn how to place a stop-loss order. Follow asset storage security rules; use non-custodial and decentralized solutions. Naturally, you need to master different platforms and ways to store assets and diversify your cryptocurrencies. My advice is not to trust business empires, which create the desired image for themselves using mass media, and to look for reliable experts instead. (Ed.: Andrey Elinson has previously admitted that his path to success was difficult. His first attempts at investing weren't the most spot on, but justified risk and a personalized investment strategy have let him achieve the desired result in cryptocurrency trading.)
The problems of the global financial system affect all markets, and it is already clear that 2023 will be a year of trials. The cryptocurrency market will also be affected. But a healthy attitude to the crypto tool, coupled with caution, can help investors preserve and multiply their money. The global economy increasingly needs the modern technology underlying the crypto sphere, and this trend is unlikely to change under the pressure of the current political and economic events.
About the Author
Andrey Elinson was born May 18, 1985 in Tolyatti, Samara region. At school, he got interested in programming. In 2022, he got accepted into several leading Moscow universities for technical professions but chose the Faculty of Management and Applied Mathematics of the Moscow Institute of Finance and Technology. While still getting his first degree, Elinson enrolled in Management and Economics. After graduating from both faculties, he enrolled in one of the oldest business schools in Europe, L'École des hautes études commerciales de Paris, from which he later left for the United States. There Andrey Elinson got a job at a startup in Silicon Valley as a programmer In 2012, he became actively involved in cryptocurrency trading and founded a small company. A year later, its value already exceeded $1 million. In 2020, Andrey Elinson sold his business, moved to Canada with his wife and two children, and opened an online cryptocurrency trading school.
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.