I planned to share something else with you this weekend, but this strange epidemic keeps popping in our faces and evoking global panic.
The coronavirus outbreak seems to be causing a lot more harm than initially perceived. The last week of February saw the worst performance for major stock markets since the financial crisis in 2008. Stocks, bonds, crypto… name it – virtually every financial instrument is being battered by this deadly outbreak, making people lose a lot of money.
Interest rates are being slashed (in the United States), factories (in China) are slowing down as operations have been paused to contain the virus. Customers are purchasing less just so they reduce exposure to items that could expose them to the virus. Countries are placing travel restrictions, people’s businesses and jobs are being affected and some are being forced to work from home. Schools, churches, and public places are being temporarily shut down to contain the virus.
The sporting sector isn’t left out. Earlier this week, Nottingham Forest and Olympiakos owner Evangelos Marinakis revealed that he had tested positive for the virus. This report led to the postponement of the Man City v Arsenal fixture that was supposed to take place on Wednesday, 11th March after a small number of Arsenal players were confirmed to have come in close contact with the club owner.
Reports from trusted sources have it that all Premier League games will be played behind closed doors for the foreseeable future. This seems a terrible idea if it continues as games as club revenues will be affected, although ticket holders will be able to stream live games. A couple of global sporting activities have either been suspended, postponed, or cancelled.
The crypto market saw billions of dollars wiped away on Thursday 12th March as bitcoin finally received its fair share of the corona market effect. These price crashes saw bitcoin trade for as low as $5,550 (about 30% loss) while some other cryptocurrencies had even bigger percentage losses.
Crude oil, which is the major source of income for the Nigerian government tanked heavily to about $30. This reduces revenue for the government. Sooner or later, the CBN will be faced with the option of devaluing the naira.
Haven’t we seen this before? Remember when the naira exchanged against the USD for 400naira/ dollar. Ripple effect? Importation will become more expensive. Prices of goods and services will spike. There will be reduced purchasing power from the public. The services and subscriptions you pay for in USD (e.g. Netflix will cost you more.
Anything I can do right now to prep myself?
Oh yes! One of the things you should be doing right now is hedging your naira by buying units of the dollar. The easiest way to hedge against this devaluation is by exchanging your fiat for cryptocurrencies known as stablecoins. These stablecoins are pegged 1:1 against the USD and do not fluctuate in prices, so it’s equivalent to buying the USD.
Cryptocurrency comes first due to the ease of swap, lack of middleman involved, extremely low cost, as well as security. If eventually naira devaluation happens, you’d have preserved the value of your money and even make more by converting back to naira at a higher rate.
Just like stocks, lots of top crypto prices tanked lately and seems to have presented buying opportunities for smart investors. Those who have loads of cash on the sidelines will be keeping an eye for when this entire quagmire comes to an end.
PS: I am not a financial advisor, and this is in no way financial advice. However, it is in times like this that wealth is created.
Stay safe!